Japan’s Nikkei falls 4.7% after ruling party picks Ishiba as next prime minister

Japan’s benchmark Nikkei 225 index fell nearly 5 percent early Monday after the country’s ruling Liberal Democrats chose Shigeru Ishiba, a former defense minister, as the next prime minister.

Ishiba is set to succeed current Prime Minister Fumio Kishida on Tuesday, who resigned as his popularity ratings plummeted. After winning the party vote on Friday, Ishiba said he would largely continue Kishida’s approach to trying to revive Japan’s sluggish economic growth.

Markets viewed Ishiba’s main rival, Economic Security Minister Sanae Takaichi, as a more investor-friendly option, analysts said.

The Nikkei was trading up 4.4 percent at 38,062.06 about an hour after markets opened.

Ishiba expressed support for the Bank of Japan’s efforts to raise interest rates after many years of keeping them close to zero percent. That helped lift the yen against the U.S. dollar, and exporter shares fell, Toyota Motor Corp. down 6.2% on Monday morning. Shares of Honda Motor Co. decreased by 6.8%, and those of Nissan Motor Co. they decreased by 5.8%.

A stronger yen is a disadvantage for Japanese companies that make much of their sales and profits overseas.

The prime minister-to-be also said he was in favor of raising the minimum wage, allowing for increases in corporate taxes and taxes on financial assets.

Kishida advocated an economic policy he called “new capitalism”, which called for a more equal distribution of national wealth. But the sharp rise in prices, partly due to a weakening yen, has undermined progress towards encouraging consumers to spend more.

The dollar fell from above 146 yen to below 143 yen after the ruling party’s vote ended late Friday. It was trading at 142.65 yen early Monday, up from 142.29.