Tokyo stocks plunge 3,000 yen on US midterm jitters, but history favors a rebound

Tokyo stocks plunged over 3,000 yen on Wednesday amid US midterm election results, with markets pricing in pessimistic scenarios including stricter regulation and an end to AI investment, according to Daiwa Securities chief strategist Yuhiro Tsuboi. Tsuboi noted global markets were unsettled by concerns over a potential shift in US direction as Democrats outperformed expectations. He said the selloff was a stereotypical reaction, amplified by foreign investors using Japanese equities for hedging, though prices recovered after President Trump accepted defeat. Historically, midterm elections have been positive for stocks, with the S&P 500 rising about 10% on average over 100 trading days since 1946. A Republican president with a Democratic Congress has correlated with roughly 20% gains over 164 trading days, as divided government tends to balance policy.