With Sanae Takaichi set to become Japan’s prime minister, advancing expansionist economic policies, concerns have been raised that the Bank of Japan will avoid increasing interest rates this month. However, a pause would be reconsidered if the yen’s value continues to decline.
Japanese stocks jumped over 4% to reach a record high while the yen weakened on Monday after Sanae Takaichi, known for her fiscal and monetary stance, was elected as leader of the ruling party, putting her as Japan’s first female prime minister.
Gold jumped to an all-time high above $ 3,900, while the leading cryptocurrency, Bitcoin, also reached a new peak on Sunday. Investors are increasingly turning their attention to alternative assets as they feel anxious about the potential US government shutdown.
Japan’s Nikkei index increased as much as 4.3% to 47,734.04 in the opening minutes of trading after Takaichi beat the more moderate Shinjiro Koizumi in the Liberal Democratic Party’s leadership election on Saturday, stoking expectations for fiscal stimulus.
The yen dropped 1.6% to near 150 per US dollar, while short-term Japanese government bonds slid to a two-week low as traders reduced their bets on the Bank of Japan (BOJ) resuming interest rate hikes.
The probability of a rate increase of the BOJ by year-end dropped to 41%, down from 68% on Friday.
A year ago, Takaichi had criticized BOJ’s rate hike decision, calling it “stupid,” although her recent comments have been restrained, stating that central bank policy would be aligned with the government’s goals.
With Sanae Takaichi set to become Japan’s prime minister, advancing expansionist economic policies, concerns have been raised that the Bank of Japan will avoid increasing interest rates this month. However, a pause would be reconsidered if the yen’s value continues to decline.
Takaichi is likely to become Japan’s first female leader next week after winning the ruling party’s leadership presidency, standing out in the contest as the only candidate favoring significant government spending and monetary policy easing.
Economists at Morgan Stanley MUFG Securities stated in a research report that Takaichi’s approach aligns closely with BOJ Governor Kazuo Ueda’s approach to policy normalization, suggesting that fears of radical fiscal expansion with the BOJ are overblown.
Most major stock markets, including those in China, South Korea, and Taiwan, were closed for the holidays.
Hong Kong’s Hang Seng declined 0.3% before Tuesday’s holiday, and Australia’s benchmark eased 0.1%, although trading was thinned by the state holidays in New South Wales and Queensland.
S&P 500 futures in the United States pointed 0.2% higher after the cash index rose to a new record on Friday. The US dollar regained its ground against European currencies after momentum built on its strength against the yen, after a 0.5% decline against its other major peers. The euro dropped 0.25% to $1.1714, and the pound slipped 0.23% to $1.34385.
The last time the gold was traded at around $3,904 after climbing as much as 0.9% to a record $3,919.59. The cryptocurrency Bitcoin was traded at around $123,590 after reaching its peak of $125,653.32 on Sunday. Geoffrey Kendrick, head of digital assets research at Standard Chartered Bank, stated that the US government shutdown was significant this time around, noting that bitcoin is sensitive to US government risks. Kendrick predicted that the cryptocurrency will increase throughout the shutdown and will soon reach $135,000.
Oil prices increased after OPEC+ announced on Sunday that it planned to increase its output by 137,000 barrels per day (bpd) from November, the same monthly increase as in October, despite ongoing concerns about a looming oversupply.
Before the meeting, sources reported that Russia was supporting an increase in output of 137,000 bpd to avoid pressuring prices, but Saudi Arabia had favored a larger boost, possibly double or even triple or quadruple, to regain market share more quickly. Brent crude increased 1.3% to $65.39 a barrel, while the US West Texas Intermediate crude increased 1.4% to $61.71.
