The yen fell and Japanese stocks advanced after Prime Minister Shigeru Ishiba said on the weekend that he intends to step down.
Japan’s currency slid as much as 0.8% against the dollar on concern the political instability will reduce the prospect of the Bank of Japan raising interest rates.
Japanese shares rallied thanks to the positive tailwind from the weaker yen and a potential increase in government stimulus under a new premier.
Broader Asian stocks gained as traders boosted bets on Federal Reserve rate cuts following Friday’s weak US payrolls data. European equity futures traded in a narrow range.
French government bond futures were little changed before a confidence vote in parliament Monday, when François Bayrou’s government is likely to fall.
Ishiba’s decision to resign followed election setbacks in which his Liberal Democratic Party lost its majorities in both houses of parliament.
His exit heightens investor uncertainty in the weeks ahead until a new leader emerges. “Markets are concerned that the next LDP leader will lean more towards fiscal expansion,” said Carol Kong, strategist at Commonwealth Bank of Australia in Sydney.
