Japanese Stocks Plummet as New PM Takes the Reins
The Tokyo stock market took a drastic tumble on Monday, with the Nikkei 225 index plummeting nearly 5% in early trading. The sudden downturn came on the heels of the Liberal Democratic Party’s decision to appoint Shigeru Ishiba, a former defense minister, as the country’s next prime minister. Ishiba is set to take over from outgoing PM Fumio Kishida, whose popularity ratings had been in free fall.
Ishiba has pledged to largely maintain Kishida’s economic policies, which had aimed to revitalize Japan’s stagnant growth. However, market analysts had been rooting for Ishiba’s rival, Economic Security Minister Sanae Takaichi, who was seen as more business-friendly.
As the markets opened, the Nikkei index was down 4.4% at 38,062.06. The yen, meanwhile, surged against the US dollar, dealing a blow to Japanese exporters. Shares of Toyota, Honda, and Nissan all took a hit, with Toyota plummeting 6.2%, Honda falling 6.8%, and Nissan declining 5.8%. A stronger yen puts Japanese companies that rely heavily on overseas sales at a disadvantage.
Ishiba has expressed support for the Bank of Japan’s plans to hike interest rates, which have been near zero for years. He has also indicated that he favors increasing the minimum wage, allowing corporate taxes to rise, and imposing higher taxes on financial assets. In contrast, Kishida’s “new capitalism” policy had aimed to redistribute national wealth more evenly. However, rising prices, partly due to a weakening yen, had undermined progress towards encouraging consumer spending.
The dollar fell sharply against the yen following the Liberal Democratic Party’s vote on Friday, dropping from over 146 yen to under 143 yen. On Monday, it was trading at 142.65 yen, up from 142.29.
Leave a Reply