Ishiba Shock: Japanese Stocks Plummet After New PM Elected

Japan’s stocks plummeted on the election of a new Prime Minister, Shigeru Ishiba, a critic of the country’s low interest rates.

Stocks in Japan fell after the country’s governing party chose a presumed hawkish-on-rates leader, as its Nikkei 225 index dropped 4.8 percent in reaction – now known as “Ishiba Shock.” 

After a recent surge of inflation, the Bank of Japan raised interest rates twice in 2024. The bank’s governor, Kazuo Ueda, indicated plans to continue increasing rates.

India Update

Food inflation easing, low oil prices shine.

India predicts food inflation will ease, and low oil prices will be a "bright spot for the economy," according to a government monthly report. Its central bank indicated headline inflation could average 4.5% in the second half of the fiscal year, helped along by weaker crude oil prices, but volatility in food prices might pose a challenge.

India's retail inflation was 3.65% in August, higher than the revised 3.60% in July, due to an increase in vegetable prices. The report continues to claim GDP growth projection is 6.5%-7%.

China Update

China’s stock indexes increased by more than 8% this week, extending a winning streak on the back of a giant stimulus package. Trading volume on the Shanghai and Shenzhen stock exchanges reached 2.59 trillion yuan ($368.78 billion), beating a previous high of 2.37 trillion yuan back in late may of 2015.

Back then, during a six month period, the Chinese stock market doubled, proving ultimately to be a bubble, soaring in some cases beyond 5,100 points – it would later crash. A major difference this time around is how the yuan is trading stronger against the US dollar.

Exchanges were closed for the rest of this week in order to commemorate the 75th anniversary of the People’s Republic of China. Trading will resume on Oct. 8.

United Kingdom Update

High inflation was caused by the Bank of England (BoE) keeping interest rates too low for too long, is former head Lord Mervyn King’s conclusion.

Though he conceded that inflation now seems to be under control, he took issue with central bankers’ failing to act fast enough. He explained the BoE finally “raised interest rates like all other central banks - it wasn't just the Bank of England - and inflation is now back under control," determining rates were presently "in the right ballpark."

Recently, the BoE chose to keep the base rate at 5%. They meet again in November.

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