Nikkei index plunges more than 4%, Yoshihide Suga may unexpectedly be elected as prime minister

The Japanese stock market saw a sharp decline, with the Nikkei index futures plummeting by over 6% on the 28th.

Recently, the Liberal Democratic Party of Japan held voting and ballot counting in Tokyo to elect a new party leader. After two rounds of intense voting, former Secretary-General of the LDP, Shigeru Ishiba, was ultimately elected as the new party leader. As the ruling coalition led by the LDP holds a majority in both houses of the Japanese parliament, Ishiba will be nominated as the Prime Minister in the upcoming extraordinary session of the Diet, succeeding the current Prime Minister Fumio Kishida to become the 102nd Prime Minister of Japan.

Analysts believe that Ishiba's unexpected election as the Prime Minister of Japan led to a major turnaround for the Japanese yen. The Nikkei 225 index futures plummeted by over 2000 points at one point during trading, triggering a circuit breaker. This is because the new Prime Minister reignited expectations of a rate hike by the Bank of Japan in October.

Previously, the market had been digesting the expectation of another candidate, Sanae Takaichi, winning. She had stated earlier this week that she hoped the Bank of Japan would maintain its loose monetary policy. According to analysts, Ishiba's past statements indicate that he is a monetary hawk. However, based on the recent statement by the Governor of the Bank of Japan last week emphasizing the importance of financial stability, the timing of a rate hike should be carefully considered based on the actual market conditions and expectations