Asian Markets Rise as Japanese Prime Minister’s Resignation Sparks Yen Decline

Asian markets experienced a surge on Monday, with Tokyo’s Nikkei index gaining nearly 2% after Japanese Prime Minister Shigeru Ishiba announced his decision to resign. This move led to a decline in the value of the yen, with the dollar rising to 148.14 yen in morning trade, up from 147.07 yen on Friday. The resignation of Prime Minister Ishiba has introduced fresh uncertainty for the world’s fourth-largest economy, causing Japanese bond yields to climb.

Investors were also digesting weak US jobs data, which has cemented expectations of a Federal Reserve interest rate cut later this month. According to Michael Wan, an analyst at MUFG, the combination of weak US labor market data and rising political uncertainty in Japan dominated global markets as the week began in Asia. The rise in expectations of Fed rate cuts is expected to provide some breathing space and policy room for Asian central banks.

The yen’s decline benefited Japanese exporters, with the Nikkei index gaining 1.9%. Other Asian markets also experienced gains, with Hong Kong and Shanghai rising 0.3%, Taipei up 0.5%, and Seoul gaining 0.3%. However, Sydney fell 0.3%, while Singapore and Wellington rose 0.1% each.

The US jobs data has significant implications for the global economy, and a sharp US slowdown could lead to a hard-landing recession, affecting Asian currencies. Nevertheless, Michael Brown, a senior research strategist at Pepperstone, noted that the potential candidates to lead Japan’s ruling party are likely to propose looser fiscal stances, which could further pressure the long end of the curve.

In terms of key figures, the Tokyo Nikkei 225 rose 1.9% to 43,816.02, while the Hong Kong Hang Seng Index gained 0.3% to 25,499.10. The Shanghai Composite also rose 0.3% to 3,825.83. The euro/dollar and pound/dollar exchange rates declined, while the dollar/yen exchange rate rose. West Texas Intermediate and Brent North Sea Crude prices climbed 1.3% each.

The developments in Asian markets are likely to have significant implications for the global economy, particularly in light of the ongoing uncertainty in Japan and the expected Federal Reserve interest rate cut. As the situation continues to unfold, investors will be closely watching the markets for any further signs of instability or growth.