September 27th, the former Secretary-General of Japan's Liberal Democratic Party (LDP), Shigeru Ishiba, won the majority of votes in the second round of the LDP presidential election, becoming the new president of the LDP. According to convention, the new LDP president will succeed the Prime Minister on October 1st following a parliamentary designation election.

After the announcement, the US dollar plunged against the Japanese yen, with a drop of 1.4%, falling to a minimum of 142.80.

Previously, the somewhat hawkish Shigeru Ishiba has directly or indirectly expressed opposition to "Abenomics" on multiple occasions, with a preference in economic and financial policies for "hoping for marginal monetary tightening, marginal appreciation of the yen, and fiscal tightening." Although the Bank of Japan is independent of the Japanese government, traders speculate that the government will exert pressure on monetary policy, leading to the appreciation of the yen today.

Affected by the yen's trend, the December contract of the Nikkei 225 index on the Chicago Mercantile Exchange fell by 3.2% to 38,145.00 points. Prior to this, the underlying Nikkei 225 index closed up 2.3%, at 39,829.56 points, surpassing the level of July 31st. The price of Japan's benchmark 10-year government bond futures fell, indicating that yields are expected to rise.

Regarding Ishiba's election, China International Capital Corporation (CICC) believes that the price fluctuations of various Japanese assets may reverse the "Abenomics trade," or may lead to the appreciation of the yen, a decline in Japanese stocks, and an upward trend in Japanese bond yields. However, considering the change in magnitude, taking into account that Japan in 2024 has significantly changed from 2012, it is expected that the magnitude of change will likely be weakened.

Andrew Jackson, a strategist at Ortus Advisors, stated that today's surge in the yen has shown that the market seems to be preparing for Ishiba's victory, with a sharp market reaction.

With the end of the LDP election, the market has now shifted its focus to the narrowing of the Japan-US interest rate differential, but the outlook is not clear. On the Japanese side, although Ishiba is more supportive of the Bank of Japan adjusting its current easy monetary policy, the current Governor of the Bank of Japan, Haruhiko Kuroda, has stated that the Bank of Japan is not in a hurry to raise interest rates. On the US side, traders are still uncertain about the speed and scale of the Federal Reserve's next move.

Charu Chanana, Global Market Strategist at Saxo Markets, believes that "this makes the yen a player in the game of yield differentials again. The yen (relative to the US dollar) has room to strengthen, but the pace will depend on the Federal Reserve's rate cut cycle."

It is understood that Ishiba is currently 67 years old and this is his fifth run for the party leadership. He worked in banking in his early years and has been involved in politics for 38 years, covering various fields such as agriculture, security, and local revitalization. He has served as the LDP Secretary-General and the Chairman of the Policy Research Council, and is known as a "policy expert."

There were a total of 9 candidates in this election, namely the former Minister of the Environment, Shinjiro Koizumi, the former LDP Secretary-General, Shigeru Ishiba, the current Minister in charge of Economic Security, Sanae Takaichi, the former Minister in charge of Economic Security, Takayuki Kobayashi, the current Minister of Digital Affairs, Taro Kono, the current Chief Cabinet Secretary, Yoshihide Suga, the current LDP Secretary-General, Toshihiro Nikai, the former Chief Cabinet Secretary, Katsuyuki Kawai, and the current Minister of Foreign Affairs, Yoriko Kawaguchi.