Japanese stocks likely to fall amid concerns over interest rates

Japanese stocks are expected to fall on Monday following Shigeru Ishiba’s unexpected win in the ruling party’s leadership race, which has raised concerns about potential interest rate hikes.

Nikkei 225 Stock Average futures dropped 6 per cent in Osaka after Ishiba’s victory on Friday, causing uncertainty in the market.

Traders had initially anticipated a different outcome, leading to a 2.3 per cent increase in the Nikkei 225 before the final result was announced. The market is likely to experience volatility as investors await more details on Ishiba’s policies.

The yen strengthened in response to Ishiba’s win, impacting exporters negatively but potentially benefiting banks anticipating higher profits from higher interest rates.

Analysts suggest that Ishiba’s focus on boosting Japan’s military could have a positive impact on the defence sector.

“The beginning of the week is likely to be volatile,” said Rina Oshimo, a strategist at Okasan Securities Co. in Tokyo. “Since Ishiba has been advocating for fiscal consolidation and other measures, the yen’s appreciation may become a headwind for Japanese equities.”

Attribution: Bloomberg

Subediting: Y.Yasser