Asia FX cautious amid US govt shutdown; yen tumbles after Takaichi’s LDP win
Adds details on stock moves, updates milestones
Investing.com-- Japanese stock markets rallied to record highs on Monday, while the yen weakened sharply after fiscal dove Sanae Takaichi was elected as the leader of the ruling party, setting her up to become the next prime minister.
The Nikkei 225 index jumped more than 4.5% to a record high of 48,004.0 points, while the broader TOPIX rallied nearly 3% to a peak of 3,225.41 points.
On the other hand, the yen weakened substantially, with the USD/JPY pair– which gauges the amount of yen required to buy one dollar– rising nearly 2% to 150.10 yen. The yen also hit a record low against the euro.
Takaichi was elected as the leader of the LDP in a run-off election held on Saturday. She is seen as far more fiscally dovish than predecessor Shigeru Ishiba, and has supported tax cuts and accommodative policy for the Japanese economy.
Takaichi is expected to be confirmed as prime minister in a parliamentary session in mid-October, barring no resistance from opposition parties. She will become Japan’s first female prime minister.
Takaichi has in the past opposed interest rate hikes by the Bank of Japan, and is widely expected to maintain this stance in her prime ministership. This notion was a major point of support for Japanese markets on Monday, as investors bet that the BOJ will not hike rates any time soon.
More fiscal spending– with Takaichi having outlined plans for tax breaks, subsidies, and consumer support– is expected to further boost Japanese economic growth and corporate earnings.
Japanese government bond yields rose sharply on Monday, as bond prices fell amid questions over just how Takaichi planned to fund more fiscal spending.
Industrial stocks lead on defense spending bets, banks fall
Japanese heavy industrial stocks marked outsized gains on Monday amid bets that government spending on industrialization and defense will ramp up under Takaichi.
On the other hand, bank stocks fell on bets that the BOJ will not raise lending rates in the near-term. But losses in financial stocks were also limited by expectations that Takaichi’s policies will shore up local spending and growth.
Yaskawa Electric Corp. (TYO:6506), Japan Steel Works Ltd (TYO:5631), Mitsubishi Heavy Industries, Ltd. (TYO:7011), and Kawasaki Heavy Industries, Ltd. (TYO:7012) rallied between 10% and 20%, and were the best performers on the Nikkei 225.
Finance and lending majors such as Resona Holdings, Inc. (TYO:8308), Yokohama Financial Group Inc (TYO:7186), and Shizuoka Financial Group Inc (TYO:5831), fell between 1% and 2%, and were the worst performers on the Nikkei.