Japanese Markets Surge, Bond Yields Rise as PM Ishiba Steps Down

Japanese financial markets are facing heightened volatility following Prime Minister Shigeru Ishiba's resignation, which has increased uncertainty over Japan’s fiscal direction and leadership. The yen weakened significantly against the dollar, while Japanese stocks rose due to the weaker currency, though bond markets, particularly long-maturity government bonds, are under pressure with yields on super-long bonds reaching record highs. Ishiba’s conservative fiscal stance had provided some stability, but his departure raises concerns about increased fiscal spending and looser monetary policy reminiscent of former Prime Minister Shinzo Abe’s era, potentially driving borrowing costs higher. Investors are cautious as they await the appointment of a new leader, with fears that fiscal discipline may weaken, further exacerbating market volatility. Japan’s government debt remains the highest among developed nations at nearly 250% of GDP, intensifying worries about the sustainability of public finances. Overall, markets are bracing for more choppy trading as the political and economic outlook remains uncertain.