Japan’s benchmark stock index Nikkei soared to a 21-year high owing to positive economic data, relatively low valuations, strong earnings and improved sentiment in the United States. The index increased 0.3% to its highest close since December 1996.

This is expected to boost prime minister Shinzo Abe’s confidence as he is campaigning to convince voters that the Japanese economy is on a healthy track before the Oct 22 snap elections. Moreover, investors are expecting Abe to win, which in turn has been a positive for the markets.

Economic Data

Japan’s economy grew an annualized 2.5% in the second quarter compared with preliminary estimates of a 4% expansion.

The International Monetary Fund upgraded its forecast for Japan’s growth rate to 1.5% in 2017 compared with its July forecast of 1.3% expansion as exports gain momentum.

The BOJ released its quarterly survey of over 10,000 businesses, which showed that business confidence among large manufacturers improved to a 10-year high of plus 22 in September from plus 17 in June. A positive reading implies more manufacturers find conditions to be favorable than unfavorable.

Moreover, industrial production increased 2.1% in August on a monthly basis, above a Reuters forecast of 1.9%, while household spending increased 0.6% year over year in August.

Wall Street Impact

Global economic recovery and strong profits have led to a rally in markets around the world. Japanese companies have been performing well on stronger exports, especially the automobile sector as the United States recovers from the impact of hurricanes Harvey and Irma and car sales increased. Moreover, per a Bloombergarticle, foreign investors poured 201.8 billion yen ($1.8 billion) into Japanese equities during the last week of September as investors grow more optimistic about the Japanese economy’s future.

The U.S. economy registered strong growth of 3.1% in the second quarter. Rate hike proponents argue that the U.S. economy is on solid ground and can sustain further rate hikes.