Nikkei 225 Surges After Japan PM Ishiba Exit Sparks Policy Shift Expectations For Investors

Japan’s Nikkei 225 index spiked Monday following Prime Minister Shigeru Ishiba‘s resignation, with the benchmark opening at 43,907 and peaking at 44,174.93 before settling at 43,661.87 by 1:59 p.m. local time.

The 0.61% intraday gain reflects investor optimism about potential policy shifts under new leadership.

Political Transition Creates Market Uncertainty

Ishiba announced his resignation on Sunday after the ruling Liberal Democratic Party coalition suffered significant parliamentary losses.

The 68-year-old leader cited responsibility for election defeats driven by public dissatisfaction over rising living costs, according to Reuters sources.

The yen weakened 0.7% to 148.43 against the dollar in early trading, while Japanese government bond yields remained under pressure. Super-long bond yields have approached record highs amid fiscal deficit concerns and political uncertainty.

Successor Speculation Fuels Investor Interest

Focus remains on potential successors, particularly LDP veteran Sanae Takaichi and Farm Minister Shinjiro Koizumi. Takaichi’s advocacy for maintaining ultra-low interest rates and increased government spending could boost equity markets, analysts say.

“If Sanae Takaichi is going to be the successor, that’s positive for the stock market as she wants to boost government spending,” said Takamasa Ikeda, senior portfolio manager at GCI Asset Management Tokyo, as reported by Reuters.

Trade Deal Implementation Remains Priority

The leadership change comes after Japan finalized a $550 billion trade agreement with the United States. The deal reduces U.S. tariffs on Japanese goods to 15% from 27.5%, benefiting major exporters including Toyota Motor Corp. TM, Honda Motor Co. Ltd. HMC and Nissan Motor Co. Ltd. NSANY.