In a stunning upset, Japan’s ruling party has elected Shigeru Ishiba as its new leader, sending shockwaves through the country’s stock market. The Nikkei 225 plummeted as much as 4.7% in early trading, as investors scrambled to reassess their positions in light of Ishiba’s surprise victory.
The market had been betting heavily on Sanae Takaichi, who was seen as a strong supporter of continued monetary easing by the Bank of Japan. Ishiba, on the other hand, has taken a more nuanced stance, calling for greater clarity on the BOJ’s plans to normalize policy.
The yen also felt the impact, dipping 0.3% to 142.68 per dollar, while 10-year bond futures fell 0.70 to 144.52. According to Kohei Onishi, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co., the market’s reaction is temporary and driven by speculation rather than fundamentals.
Ishiba’s policies are seen as more focused on regional development and government spending to address depopulation in rural areas, rather than relying solely on monetary stimulus. His selection of Katsunobu Kato as finance minister is also expected to ease concerns about a radical shift away from Abenomics.
Despite the initial volatility, analysts believe the market will eventually refocus on fundamentals, such as inflation, wage hikes, and market reforms. However, near-term uncertainty is likely to persist until Ishiba clarifies his stance on key issues, including corporate governance reform and tax rates.
Exporters were hit hardest by the yen’s strength, while banks saw a boost. The market is bracing for a potentially volatile week, with a general election potentially on the horizon. As Rina Oshimo, a strategist at Okasan Securities Co., noted, “The beginning of the week is likely to be volatile… the yen’s appreciation may become a headwind for Japanese equities.”
Leave a Reply