Voters in Japan handed a big victory to the ruling party in parliamentary elections Sunday. It’s a vote of confidence in Prime Minister Shinzo Abe‘s ambitious economic agenda, which goes by the name of Abenomics. Abe has pledged to stir up Japan’s moribund economy, but it will mean challenging some entrenched interests.

Abe has done this through his “three arrows” agenda. It’s a combination of loose monetary policy, increased government spending and structural reforms in the economy. Abenomics is very much in its early stages and yet it has coincided with some promising economic signs. The yen has fallen, which has helped Japan’s exporters. Growth has risen and stock prices have climbed.

Japan vs Global market performance

Below is a look at the one month, year-to-date, and one year performances for the major stock market of the world. Japan now ranks first overall with a gain of 23% in one year followed by the U.S. Emerging markets are down for the year, as highlighted in a Goldman Sachs report.

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Japan vs Global market valuation

On a forward P/E ratio basis, Topix is trading at a premium compared to S&P 500, Stoxx 600 and The World. This premium is supported by a strong EPS growth rate 0f 57.8% (2013 – consensus estimate) and 63.3% (2013 – Goldman Sachs bottom up estimate). Topix EPS growth rate for 2013E is highest in the world.

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Japan vs World earning sentiments for 2013E

Japan has a positive 2013E earning sentiment, and highest compared to all the markets.

“Earnings across the board are likely to be strong,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees the equivalent of $4.8 billion. “While the market has priced in a lot of it, I don’t think it has factored in the full potential for positive earnings yet because investors are still in wait-and-see mode. But the overall trend is for stocks to keep rising.”

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