Japanese stocks plummet as Shigeru Ishiba assumes leadership
Shigeru Ishiba, the newly elected leader of Japan's ruling Liberal Democratic Party (LDP), attending a press conference after the LDP leadership election in Tokyo, Japan on September 27, 2024. (AFP Photo)
Japanese equities experienced a sharp decline on Monday, driven by investor apprehensions surrounding incoming Prime Minister Shigeru Ishiba’s potential tax increases. Ishiba, 67, secured the leadership of the ruling Liberal Democratic Party (LDP) on Friday, paving the way for his formal appointment as prime minister by parliament on Tuesday.
In a move that could reshape Japan’s political landscape, Ishiba is reportedly planning to dissolve parliament on October 9, leading to a snap general election set for October 27, according to public broadcaster NHK and several major national dailies. Ishiba expressed his desire to call an election “as soon as possible” but did not specify a date until recent reports emerged.
He takes over from Fumio Kishida, who resigned following a damaging scandal related to party funding that contributed to his unpopularity amid rising prices. The LDP has been in power for nearly uninterrupted decades, and Ishiba’s leadership marks a significant transition.
In anticipation of his new role, Ishiba is said to be considering appointing Katsunobu Kato, a former chief cabinet secretary who participated in the LDP leadership race, as finance minister. Other key appointments may include Gen Nakatani returning as defence minister and Takeshi Iwaya taking on the role of foreign minister, according to media reports.
Investor reactions were swift following Ishiba’s victory, which was announced after Japanese stock markets closed on Friday. While stocks initially rose and the yen fell on expectations that Sanae Takaichi—an advocate of former Prime Minister Shinzo Abe’s economic policies—would win the LDP contest, the mood shifted dramatically on Monday. The Nikkei 225 index dropped nearly 4.5 percent, with the yen weakening against other currencies.
Ishiba has indicated support for the Bank of Japan’s continued normalization of its monetary easing policies and suggested that there is “room for raising the corporate tax.” He also emphasized a commitment to revitalizing rural areas and restoring confidence in the LDP following the funding scandal.
In his statements, Ishiba underscored the importance of bolstering defense ties in light of regional security concerns, particularly following recent military incursions into Japanese airspace by Chinese and Russian planes, as well as missile tests conducted by North Korea. Kishida had committed to doubling Japan’s defense spending and fostering improved relations with U.S. allies in the region, including South Korea and the Philippines.
