Market: The new Japanese Prime Minister causes a shock wave on the Tokyo Stock Exchange

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(BFM Bourse) – Winner of internal elections within the ruling party, Shigeru Ishiba is seen as being in favor of further rate increases by the Bank of Japan. Which caused the yen to take off and weighed down the Tokyo Stock Exchange.

The Tokyo Stock Exchange suffered again on Monday. The Tokyo market ended sharply lower on Monday, in particular in reaction to the uncertainty surrounding the economic policy of the new government of Shigeru Ishiba, elected head of the ruling party and next Prime Minister of Japan.

The flagship Nikkei index lost 4.80% to 37,919.55 points and the broader Topix index lost 3.47% to 2,645.94 points.

The fall in Japanese indices was caused by the rise in the yen itself linked to the election of Shigeru Ishiba.

“In Japan, the unexpected appointment of Shigeru Ishiba as head of the ruling party, the LDP, created a negative shock wave on the markets. Indeed, this veteran and former Minister of Defense is perceived as less inclined to support “He seems more keen to support the independence of the BoJ (the Bank of Japan, Editor’s note) in its ongoing campaign of gradual monetary tightening,” explains Sebastian Paris Horvitz of LBPAM.

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“Eradicate inflation”

Japanese markets started “down sharply due to the significant appreciation of the yen against the dollar, but also the caution generated by the election of (…) Shigeru Ishiba, who spoke of a strengthening of taxation financial income and an increase in corporate taxes,” commented Toshiyuki Kanayama, analyst for the Japanese financial services group Monex.

Bank of America, for its part, emphasizes that the new Prime Minister intends to “eradicate deflation in the next three years”.

“On monetary policy, he said he would respect the independence of the Bank of Japan, leaving monetary policy decision-making in the hands of the central bank, while making it clear that he would support the normalization of policy as long as it ‘aligns with the state of the economy’ and ‘does not cool it,’” the American bank continues.

“Ishiba’s election would therefore have little impact on our view that the Bank of Japan would continue to gradually raise rates, although the exact timing depends on the extent to which uncertainties about the U.S. economy dissipate.” , continues Bank of America.

The automobile in the tough

After the stock market closed for the weekend on Friday, Shigeru Ishiba, former Minister of Defense and Agriculture, was elected leader of the Liberal Democratic Party (LDP) and will succeed Fumio Kishida as leader. Prime Minister of Japan on Tuesday.

“The focus should be on the political developments of the new Ishiba government,” said Yuta Okamoto, an analyst at the Tokai Tokyo Intelligence Lab.

The future head of government Shigeru Ishiba declared during a press briefing Monday afternoon that he intended to call early legislative elections “as soon as possible, if the conditions are met, (…) on October 27” .

During his campaign for leader of the PLD, Shigeru Ishiba, 67, pledged to stimulate the economy by encouraging national investment in the technology sectors of chips and artificial intelligence.

On the foreign exchange market, the rebound of the yen against the greenback led to the sale of a wide range of stocks, which particularly concerned the technology sectors and those linked to exports.

The Japanese currency was worth 141.85 yen to the dollar, compared to 142.21 yen on Friday at 9:00 p.m. GMT.

On the value side, the strength of the yen caused values ​​linked to exports to fall significantly, particularly in the automobile sector, penalizing the shares of Toyota (-7.59%), Honda (-7.03%). or even Nissan (-5.97%).

Banking stocks, for their part, were on the rise: Mizuho (+4.18%) or Sumitomo Mitsui Financial Group (+3.06%).

(With AFP)

JM – ©2024 BFM Bourse

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