Japanese stocks plunged 1,900 points" New Prime Minister Shigeru Ishiba put out the fire: Continue monetary easing policy! Dissolution of Congress on 10/9

Table of Contents Nikkei Plunges 1900 Points Analyst: Yen Appreciation May Become a Headwind for Japanese Stocks Ishiba Calls for Continuation of "Monetary Easing" Policy Ishiba Plans to Dissolve the Diet on October 9 The former secretary-general of the Liberal Democratic Party of Japan, Shigeru Ishiba, unexpectedly "reversed the tide" last Friday (27th) and defeated his opponent Sanae Takaichi to become the new LDP leader. He is expected to officially become Japan's 102nd Prime Minister in the extraordinary Diet session vote on October 1. However, Bloomberg reported that Ishiba's unexpected victory, who is seen as a "hawk" on monetary policy, caught investors who had bet on his opponent to push for more monetary stimulus measures off guard. They rushed to unwind their positions that were built on the assumption that Takaichi would become the new prime minister and encourage the Bank of Japan to maintain its low-interest rate policy, leading to a sharp plunge in Japanese stocks on Monday morning. Nikkei Plunges 1900 Points On Monday, the Nikkei opened with a massive drop of over 1,900 points, plunging to a low of 37,943 points. As of the time of writing, it is trading at 37,937 points, a decline of around 4.7%. The Tokyo Stock Exchange Index also fell sharply by 3.25%, to 2,651 points. Analyst: Yen Appreciation May Become a Headwind for Japanese Stocks The market's reaction to Ishiba's victory was strong last Friday, with the US dollar-yen exchange rate briefly surging 1.8% before slightly declining 0.3% to 142.68 yen. As of the time of writing, it is at 142.43 (-0.29%). Rina Oshimo, a securities strategist at Tokyo Okasan Securities, stated: "The market may see volatile movements at the beginning of this week. As Ishiba advocates fiscal consolidation and other measures, the appreciation of the yen may become a headwind for Japanese stocks." Due to the strong yen, which dampens profit prospects, the drag on the Tokyo Stock Exchange Index was most severe for export-oriented stocks, with automobile shares generally plunging and real estate stocks also suffering heavy losses. However, bank stocks that had fallen last week on market speculation of Takaichi's victory rose on Monday. Ishiba Calls for Continuation of "Monetary Easing" Policy It is worth noting that while Ishiba has called for the Bank of Japan to further clarify its policy normalization plan, supporting the central bank's continued move away from ultra-low interest rates, and emphasized the need for government spending to further develop the rural economy, he stressed in a Sunday interview with NHK that given the current economic conditions, Japan's monetary policy needs to remain accommodative. This suggests he may take a more dovish stance on the issue of potential rate hikes. However, the latest report from Kyodo News indicates that Taro Aso is expected to become the next Finance Minister, and Aso has been a supporter of Abenomics, which could be seen as Ishiba's move to allay market concerns about his potentially hawkish stance. Ishiba Plans to Dissolve the Diet on October 9 Analysts say that before Ishiba's policies become clearer, investors are preparing for an increase in near-term volatility. It is worth noting that the Jiji news agency reported on Sunday that several LDP executives have revealed that Ishiba has finalized a plan to dissolve the Diet on October 9, announce the general election on October 15, and hold the House of Representatives election on October 27.