Japan stocks jump after PM resigns
Nikkei surges 1.5% as Ishiba exit sparks stimulus hopes
Japanese stocks experienced a significant surge at the market's opening following the unexpected resignation of Prime Minister Shigeru Ishiba, which fueled speculation about increased government spending by his successor. The Nikkei 225 index rose by 1.5%, reaching 43,451.07, while the yen weakened by 0.7% against the U.S. dollar, trading at 148.46.
The yield on Japan's benchmark 10-year government bond increased by 0.5 basis points to 1.575%, while the five-year yield decreased by 0.5 basis points to 1.1%. Ishiba's conservative fiscal policies had previously been viewed positively in the bond market, but concerns over Japan's substantial debt and widening fiscal deficits remain.
Ishiba's resignation followed a significant defeat in upper house elections, leading to speculation about potential successors, including Koizumi Shinjiro and Takaichi Sanae. Analysts noted that the market's positive response reflects excitement surrounding these potential leaders, particularly Takaichi, who advocates for deregulation and increased government spending.
The Japanese yen's decline and rising bond yields indicate investor concerns about persistent inflation and fiscal uncertainty. Analysts predict a period of extended uncertainty as Japan approaches the fourth quarter of 2025, with the possibility of opposition parties uniting under a rival candidate for the premiership.
In the broader Asia-Pacific region, markets traded mostly higher, with South Korea's Kospi up 0.15% and Hong Kong's Hang Seng index rising 0.23%. However, China's CSI 300 index fell by 0.3% after exports grew less than expected. Meanwhile, Australia's S&P/ASX 200 index declined by 0.38%.
Oil prices saw a slight increase following OPEC+'s announcement to lift production starting in October, although at a slower pace than previous months. Global benchmark Brent crude rose by 0.53% to $62.20 per barrel.
In the U.S., stock futures remained stable as investors prepared for a week filled with key economic data, including inflation reports. Last week, major U.S. indexes closed lower after a disappointing jobs report raised concerns about economic slowdown, despite solidifying expectations for a Federal Reserve rate cut. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all experienced declines after reaching record highs earlier in the session.
