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Ahead of Japan’s new prime minister being sworn in on Oct. 1, analysts predicted a “very ugly” Monday for the country’s stock market. A former defense minister, Shigeru Ishiba is known for his criticism of the country’s central bank’s long-standing policy of aggressive easing and stimulus, and for his support for higher taxes on companies and investment income.
After he won Japan’s ruling party’s leadership contest last week, Ishiba said that “monetary policy must remain accommodative” to economic conditions, and that he would leave interest rate decisions largely up to the Bank of Japan. However, analysts predicted that “near-term price volatility is likely to persist,” Financial Times noted, until there is more clarity on Ishiba’s fiscal stance.
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The Bank of Japan ended its long-standing negative interest rate policy in March, and raised short-term borrowing costs to 0.25% in July. Bank chief Kazuo Ueda has indicated a willingness to raise rates further if Japan makes sustainable progress toward the bank’s 2% inflation target, which the board anticipates to be within reach.
With Ishiba as prime minister, analysts told the Financial Times that “there should be no hurdles for BoJ to deliver additional rate hikes going forward.”