Japanese Stocks Rally After Prime Minister Ishiba Announces Resignation
Japan’s benchmark Nikkei 225 surged 1.45% to close at 43,643.81 on Monday, buoyed by the weekend announcement that Prime Minister Shigeru Ishiba will step down. The Topix index also climbed 1.06%, reaching a record high of 3,138.2. Ishiba’s decision follows sustained pressure after his defeat in the national election late last year.
Market watchers highlight two leading contenders to succeed Ishiba. Koizumi Shinjiro, the current agricultural minister and son of a former prime minister, is considered a frontrunner. Sanae Takaichi, a protege of the late Prime Minister Abe Shinzo and runner-up in last year’s party leadership contest, is also a significant candidate. Stefan Angrick, head of Japan and frontier markets economics at Moody’s Analytics, noted these key figures in a Monday briefing.
Richard Kaye, portfolio manager at Comgest, described the market’s positive reaction as somewhat unexpected but driven by enthusiasm for both Koizumi and Takaichi. He emphasized Takaichi’s pro-growth stance and preference for deregulation over aggressive interest rate hikes as factors likely underpinning the rally.
Currency and Bond Market Reactions
The Japanese yen weakened 0.64% against the U.S. dollar, trading at 148.33, while Japanese government bonds experienced continued selling pressure. The 30-year government bond yield rose more than 4 basis points to 3.272%, following a recent record high. Similarly, the 20-year bond yield increased over 3 basis points to 2.676%. These yield rises reflect investor concerns over persistent inflation, expectations of tighter monetary policy, and fiscal uncertainty.
Analysts from BMI, part of Fitch Solutions, cautioned that Japan faces a period of extended political uncertainty entering the fourth quarter of 2025. While the next Liberal Democratic Party (LDP) leader typically becomes prime minister, the possibility remains for opposition parties to consolidate around an alternative candidate.
Regional Market Overview
Elsewhere in Asia-Pacific, South Korea’s Kospi index advanced 0.45% to 3,219.59, with the Kosdaq rising 0.89% to 818.6. Hong Kong’s Hang Seng gained 0.8%, and China’s CSI 300 edged up 0.16% to 4,467.57 despite August export growth of 4.4% in U.S. dollar terms falling short of the 5.0% economists had forecast. Imports also grew slower than expected, weighed down by a sluggish real estate sector and rising job insecurity.
Australia’s S&P/ASX 200 declined 0.24% to 8,849.6. India’s Nifty 50 and Sensex indices increased by 0.44% and 0.34%, respectively.
Oil Prices and U.S. Market Outlook
Oil prices rose modestly after OPEC+ announced plans to increase production by 137,000 barrels per day starting in October, a slower pace than previous monthly increases. Brent crude added 0.53% to $62.20 per barrel, while U.S. West Texas Intermediate futures rose 0.6% to $65.89.
In the United States, futures were largely unchanged Sunday ahead of a critical week of economic data, including the producer price index on Wednesday and the consumer price index on Thursday. Last Friday, U.S. equity markets closed lower after a weaker-than-expected jobs report raised concerns about economic growth despite solidifying expectations for a Federal Reserve rate cut.
FinOracleAI — Market View
Japan’s equity rally following Prime Minister Ishiba’s resignation signals investor optimism around potential leadership that favors growth and deregulation, particularly if Sanae Takaichi assumes power. However, rising bond yields and currency weakness underscore ongoing inflation and monetary tightening risks. Market participants should monitor the LDP leadership contest and subsequent policy signals closely, as political uncertainty could introduce volatility.
Impact: positive
