Japan’s benchmark Nikkei 225 index fell nearly 5% early Monday after the ruling Liberal Democrats chose Shigeru Ishiba, a former defense minister, as the next prime minister.
Ishiba is due to succeed current Prime Minister Fumio Kishida on Tuesday, who resigned after his popularity fell. After winning the party’s vote on Friday, Ishiba said he would largely continue with Kishida’s approach to revive Japan’s sluggish economic growth.
Markets viewed Ishiba’s biggest rival, Economic Security Minister Sanae Takaichi, as a more investor-friendly option, analysts said.
The Nikkei was down 4.4% at 38,062.06 about an hour after markets opened.
Ishiba has expressed support for the Bank of Japan’s efforts to raise interest rates after keeping them at near zero percent for years. That helped push the yen higher against the U.S. dollar, and shares of exporters tumbled, with Toyota Motor Corp. early Monday fell 6.2%. The shares of Honda Motor Co. fell by 6.8% and those of Nissan Motor Co. by 5.8%.
A stronger yen is a disadvantage for Japanese companies that generate a large part of their turnover and profits abroad.
The future prime minister has also said he supports an increase in the minimum wage, which could increase corporate taxes and increase taxes on financial assets.
Kishida embraced an economic policy he called “new capitalism,” which called for a more equal distribution of national wealth. But sharply rising prices, partly due to a weakening yen, undermined progress in encouraging consumers to spend more.
The dollar fell from more than 146 yen to less than 143 yen after the ruling party’s vote ended late Friday. Early Monday, it traded at 142.65 yen, up from 142.29.
