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Japan’s Nikkei fell after a sharp rise in the yen following the victory of Shigeru Ishiba, a supporter of monetary policy tightening, in the race for leadership of the ruling Liberal Democratic Party..
The Nikkei fell 4.8 percent to 37,919.55 at the close, and the broader Topix index fell 3.5 percent..
Japanese government bond yields jumped, with 10-year bond yields rising by 4.5 basis points to 0.85 percent and two-year bond yields rising by seven basis points to 0.385 percent..
Ishiba, an opponent of the super-stimulus policy adopted by the Bank of Japan in the past decade, defeated Sanae Takaichi, who supports monetary easing policy, in a heated contest on Friday, the results of which were decided after the stock exchanges were already closed. Ishiba is scheduled to take over as prime minister on Tuesday.
But Ishiba’s current position is less clear, as he told NHK, “Monetary easing must remain a trend in light of the current economic conditions.”».
He had previously said at the beginning of August that the Bank of Japan was “on the right track regarding monetary policy” after the central bank abandoned its negative interest rate policy in March and raised interest rates in July..
The yen rose by about 1.9 percent on Friday before rising by another 0.3 percent to 141.78 during trading..
The appreciation of the currency reduces the revenues of many large Japanese export companies, and also makes Japanese stocks more expensive for foreign investors.
Ishiba’s support for higher taxes on corporations and investment income represents another obstacle for stocks.
Automotive company shares fell, with Toyota Motor Company shares falling 7.6 percent and Honda shares falling 7 percent.
Semiconductor sector shares fell, led by Tokyo Electron, a giant chip manufacturing equipment manufacturer, which fell nearly eight percent..
The banking sector was the only winner among 33 indexes on the Tokyo Stock Exchange, rising 1.85 percent. Banks were the biggest beneficiaries of expectations that monetary policy would return to normal.
Of the 225 stocks listed on the Nikkei index, 212 stocks declined and 13 stocks rose..
