Shinzo Abe becomes the Prime Minister of Japan, causing a scare in the Japanese stock market, Shida Kazuo and Matsumoto Kazuo breathe a sigh of relief

Shi Po Mao's "upset" victory, combined with a series of mixed economic data previously disclosed by Japan, caused the Japanese stock market to shake again, ushering in another "Black Monday" in Japan.

On Monday, the Nikkei 225 index plummeted by nearly 5%, dropping more than 1900 points intraday. On the day of his election, in the evening, the Nikkei 225 index futures trading plummeted by more than 2000 points at one point, triggering a circuit breaker.

Behind the sell-off in Japanese stocks, the prospect of a rate hike by the Bank of Japan is back on the table...

Leaving room for rate hikes, Tanaka Kazuo "feels relieved"

Last Friday, Shi Po Mao unexpectedly won the election and is expected to take over as prime minister after the National Diet's nomination election on October 1. The result directly ignited expectations of a rate hike in Japan. Japanese stock futures plunged after hours, and the yen soared against the US dollar.

According to CNBC, citing Ryota Abe, an economist at the Global Markets and Finance Department of Sumitomo Mitsui Banking Corporation, this means that the Bank of Japan "will not face any political obstacles in further raising interest rates."

Usually, "higher interest rates will strengthen the yen and put pressure on the Japanese stock market," especially for export-oriented companies. A strong yen will reduce the competitiveness of their export products in the international market.

Earlier on Friday, due to the victory of the Minister of Economic Security, Mana Takamichi, in the first round of voting, the yen weakened against the US dollar, but with Shi Po Mao defeating Takamichi in the final round of the LDP election, the yen reversed against the US dollar.

Abe pointed out that this was because the election results deviated from the market's previous expectations:

"Almost all market participants, including Sumitomo Mitsui Bank and other political analysts, expected Ms. Takamichi to win in the final vote."

It is worth noting that Mana Takamichi has always advocated maintaining low interest rates and explicitly stated that she "will not support the Bank of Japan's policy of raising interest rates to stimulate economic growth."

However, this also relieved Bank of Japan Governor Tanaka Kazuo, who had previously stated that "if the inflation rate continues to stabilize at the predicted 2%, the central bank will continue to raise interest rates." But he emphasized that the central bank will take time to assess the impact of global economic uncertainty on Japan's fragile economic recovery.

Cold economic data, Chinese stock market "bull run" puts pressure on Japanese stocks

On Monday, Japan also released "cold" economic data. Japan's industrial output accelerated its decline in August, dropping by 4.9% year-on-year. On a month-on-month basis, industrial output fell by 3.3%, exceeding the expected 0.9% decline and higher than the previous value of 3.1%.

At the same time, the strong performance of the Chinese stock market also put pressure on the Japanese stock market. Last Friday, the CSI 300 Index recorded its best single-week performance since 2008, while the Hang Seng Index in Hong Kong saw its largest single-week gain since 1998 Today, the Chinese stock market continued to soar. The CSI 300 Index rose by more than 8%, leading the Asian stock market. The total turnover of the two markets reached nearly 26 trillion yuan, setting a record high trading volume.

Britney Lam, portfolio manager at Magellan Capital, pointed out:

"Now, influenced by factors such as the high market sentiment in China, the Japanese market will face pressure."