Japan’s Nikkei rallied to an all-time high on Tuesday as markets caught up with Wall Street’s two-day surge after being closed for a public holiday earlier in the week.

The Nikkei climbed as much as 3.6% to a record 53,814.79. Meanwhile, the broader Topix gained up to 2.4% to hit a fresh record high of 3,599.31.

Major Japanese stocks saw strong gains, with SoftBank climbing up to 5%, and Advantest and Tokyo Electron surging 8.99% and 8.31%, respectively.

Meanwhile, overnight in US, Dow Jones and S&P 500 both climbed to all-time peaks, with tech shares among the outperformers. The S&P 500 gained 0.16% to finish at 6,977.27, while the Dow Jones Industrial Average added 86.13 points, or 0.17%, closing at 49,590.20. Both indices reached new intraday highs and ended the session at record levels. The Nasdaq Composite rose 0.26%, ending at 23,733.90.

What’s behind the rally?

Nikkei 225 futures surged over the three-day holiday weekend after the Yomiuri Shimbun reported late Friday that Prime Minister Sanae Takaichi could dissolve the Lower House as early as this month, raising the possibility of a snap election in early February.

Takaichi, Japan’s first female prime minister and a proponent of expansionary fiscal policies, currently enjoys strong approval ratings. An early election could further consolidate her political standing and give her greater room to govern.

“It’s widely believed in markets that if Takaichi dissolves parliament, the result will be a weaker yen, higher equities and lower bond prices,” based on the idea that “early elections mean proactive fiscal spending,” Maki Sawada, an equities strategist at Nomura Securities, was quoted as saying by Reuters.

Investor sentiment was further boosted from the yen’s sharp decline since Tokyo’s Friday close, as a weaker currency enhances the value of overseas earnings for Japan’s export-focused companies.

Yields on Japan’s 10-year government bonds increased by more than 5 basis points to 2.15%, while 20-year yields jumped over 8 basis points to 3.137%.

Meanwhile, the Japanese yen eased slightly, hitting a one-year low of 158.25 against the US dollar.

(With inputs from Reuters)