Japan’s Nikkei Drops 4%

Japan’s Nikkei drops 4% fell sharply on Monday, dropping more than 4%, in response to a significantly stronger yen. The plunge comes after Shigeru Ishiba, perceived as a monetary policy hawk, won the contest to become the country’s next prime minister.

Market Reaction: Nikkei and Topix Decline

As of 0020 GMT, the Nikkei index traded 4.11% lower, settling at 38,191.13. The broader Topix index also took a hit, shedding 2.9%. This sharp decline highlights investor concerns over potential shifts in Japan’s economic and monetary policies under Ishiba’s leadership.

Government Bond Yields Rise

In bond markets, Japanese government bond yields spiked, with the yield on 10-year benchmark notes rising by 5 basis points to reach 0.855%. This increase reflects heightened uncertainty regarding the direction of future monetary policies.

Ishiba’s Victory: A Turning Point for Japan’s Monetary Policy?

Ishiba, a well-known critic of the Bank of Japan’s extraordinary stimulus measures over the past decade, defeated Sanae Takaichi, a monetary-policy dove, in a close contest on Friday. Since the election result was announced after the markets had closed, the full impact was seen in Monday’s trading session. Ishiba is set to take office on Tuesday.

Ishiba’s Current Stance: Policy Remains Uncertain

Despite his past criticism of Japan’s aggressive stimulus policies, Ishiba’s current approach to monetary policy remains unclear. Over the weekend, he told national broadcaster NHK that “monetary policy must remain accommodative as a trend given current economic conditions,” leaving room for speculation on how his leadership might shape future policies.

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