Japan’s Nikkei stock index jumped almost 5% on Monday after the ruling Liberal Democratic Party (LDP) elected ultra-conservative Sanae Takaichi as its leader, likely making her the first female prime minister. The yen weakened as expectations grew that she would increase spending, potentially raising inflation.
Stock Market Response to Leadership Change
After the LDP elected Takaichi, who is aligned with former Prime Minister Shinzo Abe, the Nikkei 225 index rose 4.7%, reaching 47,924.52. Toyota and Honda shares also surged amid rumors of potential tariff reductions from U.S. President Donald Trump.
- Toyota shares up 4.9%
- Honda shares up 4.7%
Other Asian markets reported mixed results, while U.S. futures climbed, and oil increased by about $1 a barrel, indicating a positive sentiment in the markets.
Economic Challenges Ahead
Takaichi faces significant challenges including boosting Japan’s economic competitiveness and managing an ageing population while dealing with substantial public debt, according to BMI Fitz Solutions.
Investor optimism is notable, particularly among foreign investors, according to Neil Newman from Astris Advisory Japan, indicating confidence in Takaichi’s statements and potential economic strategies.
Global Market Influences
As Takaichi’s election news unfolded, the yen dipped against the U.S. dollar. The dollar rose to 150.31 yen from 149.33 yen. Meanwhile, U.S. stock markets have been establishing new records despite a government shutdown affecting employment data releases.
Brent crude oil also saw gains, as OPEC+ countries agreed to slightly increase production, alleviating concerns about oversupply in the market.
