Japanese Stocks Rally Following Prime Minister Ishiba’s Resignation Announcement

Japanese Stocks Rally Following Prime Minister Ishiba’s Resignation Announcement

Japan’s Nikkei 225 surged 1.5% on Monday after Prime Minister Shigeru Ishiba announced his intention to step down, a move that follows months of mounting pressure after his defeat in last year’s national election. The Topix index also climbed 1% to reach a record high, reflecting investor optimism amid political change.

Leadership Contenders Spark Market Interest

Market analysts highlight Koizumi Shinjiro, the current agricultural minister and son of a former prime minister, as a leading candidate to succeed Ishiba. Takaichi Sanae, a close ally of the late Prime Minister Abe Shinzo and runner-up in last year’s party leadership contest, is also considered a strong contender.

Richard Kaye, portfolio manager at Comgest, described the market’s upbeat reaction as somewhat surprising but linked it to the enthusiasm surrounding these potential successors. Kaye noted that Takaichi’s focus on deregulation and opposition to interest rate hikes may drive economic growth, justifying the rally.

Currency and Bond Markets Reflect Uncertainty

The Japanese yen weakened by 0.64% to 148.33 against the U.S. dollar, while Japanese government bonds experienced continued sell-offs. The 30-year bond yield rose over 4 basis points to 3.272%, following a record high last week and a significant annual increase exceeding 100 basis points. The 20-year bond yield also edged higher to 2.676%.

Investors are pricing in persistent inflation, tighter monetary policy, and fiscal uncertainties. Fitch Solutions’ BMI unit analysts warned of an extended period of uncertainty in Japan heading into the fourth quarter of 2025, noting that while the next Liberal Democratic Party leader typically becomes prime minister, a coalition of opposition parties could theoretically challenge this outcome.

Mixed Performance Across Asia-Pacific Markets

South Korea’s Kospi index rose 0.15%, with the Kosdaq small-cap index up 0.47%. Hong Kong’s Hang Seng index gained 0.23%, while China’s CSI 300 declined 0.3%. Chinese exports in August increased by 4.4% year-on-year in U.S. dollar terms, falling short of economists’ expectations of a 5.0% rise. Imports also grew less than anticipated amid ongoing real estate sector challenges and rising job insecurity.

Australia’s S&P/ASX 200 slipped 0.38%, reflecting mixed investor sentiment in the region.

Oil Prices Edge Higher After OPEC+ Production Decision

Oil prices moved up slightly after OPEC+ announced a moderated increase in production, raising output by 137,000 barrels per day starting in October—significantly less than previous monthly hikes. Brent crude rose 0.53% to $62.20 per barrel, while U.S. West Texas Intermediate futures gained 0.6% to $65.89.

U.S. Markets Await Key Inflation Data

U.S. stock futures were largely unchanged on Sunday ahead of a week packed with critical economic data, including the producer price index on Wednesday and the consumer price index on Thursday.

Last Friday, U.S. markets closed lower following a weaker-than-expected jobs report, which intensified concerns over a slowing economy despite growing expectations for a Federal Reserve rate cut. The S&P 500 fell 0.32% to 6,481.50, the Nasdaq Composite edged down 0.03% to 21,700.39, and the Dow Jones Industrial Average dropped 0.48% to 45,400.86.

Earlier in the session, all three indexes briefly reached record intraday highs before retreating.