On September 27th, during the European session, the former Secretary-General of the Liberal Democratic Party of Japan, Shigeru Ishiba, was elected as the new president of the Liberal Democratic Party of Japan, surprising the financial markets, resulting in significant volatility in the Japanese exchange rate and single stock futures.

Specific market conditions show that the US dollar against the Japanese yen plummeted more than 370 points from a high of 146.49 in the short term, hitting a low of 142.78. As of the time of publication, the currency pair is at 143.11, with an intraday decline of nearly 1.2%, and volatility exceeding 2% throughout the day.

US dollar against Japanese yen intraday chart

At the same time, the Nikkei 225 index December futures contracts once plummeted more than 5%, but have since narrowed to around 3.8%.

US dollar against Japanese yen intraday chart

Earlier in the day, the financial markets had initially anticipated that Minister of Economy, Trade and Industry Sanae Takaichi would win the election. Previously, Caijing Society had mentioned that Sanae Takaichi had repeatedly stated that the Bank of Japan should refrain from raising interest rates, maintaining ultra-low rates to support the fragile economic recovery. As a disciple of the late former Prime Minister Shinzo Abe, Sanae Takaichi also shares some similarities with Abe in her inclination towards loose monetary policies. During Abe Shinzo's tenure, he introduced 'Abenomics,' ushering in an era of negative interest rates at the Bank of Japan lasting for 8 years.

As a disciple of the late former Prime Minister Shinzo Abe, Sanae Takaichi's inclination towards monetary easing policies is somewhat similar to Abe's. Shinzo Abe introduced 'Abenomics' during his tenure, ushering in an era of negative interest rates at the Bank of Japan that lasted for 8 years.

Unlike Konomi Highichi, who supports loose monetary policy, Shigeru Ishiba, the former Secretary-General of the Liberal Democratic Party, believes that the Bank of Japan should maintain a path of monetary normalization and is expected to continue supporting the BOJ's gradual interest rate hike plan.

In his election manifesto, Shigeru Ishiba also stated: "While respecting the independence of the Bank of Japan, I hope the authorities can progress policy normalization at a pace that aligns with the actual economic situation through cautious discussions and without causing an economic slowdown."

The current Prime Minister of Japan, Fumio Kishida's term as the president of the Liberal Democratic Party will end on September 30. As per tradition, Shigeru Ishiba is expected to succeed him as the Prime Minister following nomination elections in the Diet on October 1. Ishiba has previously stated that if elected, he will continue to promote Kishida's basic economic policies.

Economist Taro Kimura commented that the ruling Liberal Democratic Party's choice of Shigeru Ishiba as the next party leader led to a sharp rise in the yen, indicating Ishiba's possible economic policy direction - towards a more balanced budget and supporting the Bank of Japan in achieving interest rate normalization.

Former Chief Economist of the Bank of Japan, Seisaku Kameda, stated: "Financial markets have been nervous about the election results, but now that we know the outcome, it means there will be no major shift in Japan's economic policies."

Hiroshi Watanabe, Senior Economist at Sony Financial Group, mentioned, "It seems that the Japanese stock market is poised to lose all gains today. The central bank will be seeking policy normalization while observing the data, which may be somewhat unfavorable for the stock market."

Global Market Strategist at Saxo Markets, Charu Chanana, stated, "This will once again position the yen as a currency influenced by the (US-Japan) bond yield spread differential. The yen still has room to rise, but the extent of the increase will depend on the Federal Reserve's interest rate cut cycle."