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japan is about to welcome a new prime minister, shigeru ishiba, but the japanese stock market does not seem to welcome him.

japanese stocks had a bad start on monday, with the nikkei 225 index falling by more than 4% at the opening, and the topix index also falling by 1.6%. as of press time, the nikkei 225 index fell 4.18%, and the topix index's decline expanded to 3.61%.

an important reason why japanese stocks collapsed first was that investors were worried that former defense minister shigeru ishiba was likely to trigger a rise in japanese interest rates.

since the news came last friday that shigeru ishiba was elected president of the liberal democratic party, nikkei 225 futures fell 6% that day. before the liberal democratic party's presidential candidate was announced, the nikkei index rose by 2.3% on the grounds that the market had originally bet that sanae takaichi, a candidate who opposes interest rate hikes, would win and become japan's first female prime minister.

analysts have previously warned that japanese stocks may fluctuate sharply in the short term before ishiba's policies become clearer. its policy stance is positive for the yen, which means exporters will face headwinds, but banks may benefit from rising interest rates. additionally, ishiba's stance on plans to increase military spending is bullish for defense stocks.

shigeru ishiba's position

shigeru ishiba recently stated that he supports the bank of japan’s independence and normalization path in principle. however, the bank of japan is generally under greater pressure from the government, so the market attaches great importance to the japanese government's monetary views.

in an interview on sunday, ishiba stressed that the bank of japan should continue its monetary easing policy. however, judging from the trend of japanese stocks on monday, the market still has a certain degree of doubts about ishiba's speech.

rina oshimo, a strategist at okasan securities in tokyo, pointed out that since shigeru ishiba has been advocating fiscal consolidation and other measures, the yen will appreciate and put pressure on japanese stocks, and the stock market will inevitably be volatile at the beginning of this week.

hirofumi kasai, senior strategist at tokio marine asset management, suggested focusing on domestic companies. given shigeru ishiba's desire to support the rural economy, stocks of domestic companies - especially those that benefit from regional revitalization measures - will be favored. secondly, japan's overall direction of getting out of deflation will not change.

morgan stanley mitsubishi ufj securities co. is also focused on domestic demand-oriented stocks. goldman sachs warned investors to be wary of short-term fluctuations, saying that the market needs to be prepared before sinopec makes its stance clear.