Japanese stocks rallied on a weaker yen Monday as traders bet Prime Minister Shinzo Abe will call a snap election, but other Asian markets struggled on persistent North Korea concerns following a weekend of tense exchanges with Donald Trump.
Abe is expected to announce a vote for next month, in which most see him as likely to cruise to victory with the main opposition in disarray and his popularity boosted by his handling of the ongoing Korean crisis.
Adding to the positive tone in Tokyo was a report saying the leader is also considering a multi-billion-dollar stimulus for the stuttering economy.
The prospect of more cash being pumped into financial markets weighed on the yen, providing a boost to exporters in Tokyo trade.
The dollar rose back around 112.50 yen, having fallen at the end of last week below 112 yen, while the Nikkei went into the break 0.6 percent higher.
"The yen is in a favourable range for Japanese stocks," Toshikazu Horiuchi, a broker at IwaiCosmo Securities, told AFP. "Market players are paying attention to the election, hoping for campaign pledges to boost the economy."
However, most other regional markets were unable to track Tokyo's lead following another weekend stand-off between Washington and Pyongyang.
- 'Some sort of conflict' -
After North Korea's threat last week to test a hydrogen bomb in the Pacific, Trump and Kim Jong-Un's regime traded fresh barbs.
With (Other OTC: WWTH - news) the North warning of a missile attack on the US and Trump tweeting its leaders "won't be around much longer!", Russian Foreign Minister Sergei Lavrov said "we could drop into a very unpredictable nosedive".
While most observers say there is little chance of a nuclear war, the ongoing spat is keeping traders on their toes and Greg McKenna, chief market strategist at AxiTrader, said: "It all sounds like it's headed toward some sort of conflict."
Hong Kong retreated 0.8 percent and Seoul was off 0.4 percent while Shanghai fell 0.2 percent and Singapore was also down.
However, Sydney edged up 0.3 percent and Wellington was up 0.4 percent despite uncertainty following the weekend vote that left New Zealand with a hung parliament.
On currency markets the New Zealand dollar slipped 0.8 percent, while the euro edged down as German Chancellor Angela Merkel looked set to win a fourth term but with a much reduced share of the vote and a big jump in support for the far-right party.
But Marito Ueda, senior dealer at FX Prime, said the single currency was "beginning to rebound as she secured her next term anyway".
- Key figures around 0230 GMT -
Tokyo - Nikkei 225: UP 0.6 percent at 20,414.93 (break)
Hong Kong - Hang Seng: DOWN 0.8 percent at 27,649.63
Shanghai - Composite: DOWN 0.2 percent at 3,344.64
Euro/dollar: DOWN at $1.1930 from $1.1945 at 2040 GMT on Friday
Dollar/yen: UP at 112.48 yen from 112.06 yen
Pound/dollar: UP at $1.3530 from $1.3525
Oil - West Texas Intermediate: DOWN nine cents at $50.57 per barrel
Oil - Brent North Sea: DOWN six cents at $56.80
New York - DOW: DOWN less than 0.1 percent at 22,349.59 (close)
London - FTSE 100: UP 0.6 percent at 7,310.64 (close)
- Bloomberg News contributed to this story -