Japan’s main stock markets surged on Monday after Prime Minister Shigeru Ishiba stepped down amid escalating political pressure, triggering speculation over the next leader and the country’s policy direction.
The Nikkei 225 jumped 1.8% while the Topix rose more than 1% to a new record, as traders bet on prospects for more accommodative economic measures under potential successors.
The yen weakened almost 0.7% to 148.33 per dollar in the wake of Ishiba’s resignation, while Japanese government bonds faced more selling, reflecting uncertainty around the future of fiscal and monetary policy.
Market participants are eyeing contenders such as Sanae Takaichi, a vocal critic of recent Bank of Japan rate hikes, as well as Shinjiro Koizumi, whose profile has grown as agriculture minister.
Ishiba’s resignation, announced a day after he finalized a trade deal with Washington, came as mounting electoral losses eroded his mandate. Despite the Liberal Democratic Party’s overwhelming presence in the lower house, its loss of majority in the upper chamber means the leadership transition may not be straightforward, raising the possibility of the opposition uniting behind a rival candidate.
Ishiba will remain in office until the ruling party selects a new leader in an upcoming emergency race. Markets are bracing for a period of political and policy flux in the world’s fourth-largest economy as investors assess whether a new face at the helm could loosen fiscal constraints or chart a new course for monetary policy.
