Japanese shares rose and the yen dipped after the Liberal Democratic Party, led by Shinzo Abe, won Japan's general elections.
According to British Broadcasting Corporation report, the Nikkei 225 index rose one per cent and the Japanese currency fell to a 20-month low of 84.48 yen against the US dollar.
Abe has said he will implement measures to help revive the world's third-largest economy, which has been battling years of sluggish growth.
He has also promised to take steps to weaken the yen and fight deflation.
"The Liberal Democratic Party's big victory is in line with market expectations and it will help to keep the yen weak and share prices high, at least for now," said Kyohei Morita, chief economist at Barclays Securities Japan.
Japan's economy has been hurt by a variety of factors over the past few years, not least the strength of its currency, the yen.
A strong yen makes Japanese goods more expensive to foreign buyers and also hurts profits at the country's exporters, which rely heavily on foreign sales for growth.
The Japanese currency has been volatile in recent times and rose almost six per cent against the US dollar between April 2011 and November 2012, despite efforts by the policymakers to try to weaken it.
The strength of the currency has led to concerns that some Japanese manufacturers may shift a part of their operations abroad in an attempt to maintain their competitiveness, a move that would further hurt the country's economy.
Japan has also been fighting deflation or falling prices for many years, which has affected domestic demand as consumers tend to put off their purchases in hopes of getting a better deal later on.
Before the elections, Abe had said that he would implement measures directed at weakening the yen and fighting deflation.
He said that he would set an inflation target as high as three per cent and even suggested that Japan's central bank, the Bank of Japan, should print "unlimited yen" to help counter falling prices.
Analysts said that given the indications of a convincing win, Abe should be able to introduce his policies, which they said might weaken the yen further.
Neil Gilbert a market strategist at GFT Forex said that the term of current governor of the Bank of Japan was scheduled to end in April neat year and Abe "could get a BOJ governor who thinks along the same lines".
"Therefore, I see the yen continuing to weaken based on Abe's policy, and the future policy of his hand-picked governor," Gilbert added.
"The fact that Abe points to changes in the BOJ law or forex levels, or aggressive easing as solutions to Japan's problems is, if anything, worrying," said Yuuki Sakurai of Fukoku Capital Management
During the election campaign, Abe had also suggested that he would look at changing the law that governs the central bank, in an attempt to have more control over it to ensure that the BOJ helps the government's efforts to boost growth.
However, there are fears that such a move may hurt the central bank's independence in the long run.
At the same time, some analysts said that the measures being suggested by Abe were short-term solutions and that policymakers needed to address various key issues to ensure sustained economic growth.
"The fact that Abe points to changes in the BOJ law or forex levels, or aggressive easing as solutions to Japan's problems is, if anything, worrying," said Yuuki Sakurai, chief executive of Fukoku Capital Management.
"They should be treated as tools to buy time to implement structural reforms, but we're not hearing anything about deep reforms that the LDP wants to carry out."
Analysts say the new government will have to try to reduce Japan's debt, the highest among industrialised nations, while keeping its spending at a level that can support growth.
