Japanese elections, LDP loses majority, Yen weakens

Japan's benchmark Nikkei 225 index and the Topix index rose on Monday, supported by a weaker yen amid political uncertainty as the ruling Liberal Democratic Party lost its parliamentary majority.

The Nikkei rose 1.82% to close at 38,605.53, leading gains in Asia while the Topix advanced 1.51% to 2,657.78. The yen fell 0.64 percent to 153.28 on Monday.

The Liberal Democratic Party and its coalition partner Komeito won 215 seats out of 465, while the opposition Constitutional Democratic Party and the Democratic Party for the People made significant gains in these elections.

Some analysts said this political uncertainty may prevent the Bank of Japan from raising interest rates.

Izumi Devalier, chief Japan economist at Bank of America, said that while political uncertainty and instability could delay interest rate hikes, the Bank of Japan cannot ignore continued weakness in the yen.

“I don’t think this necessarily means that the Bank of Japan will stop working for the foreseeable future. Obviously you have to monitor market developments, but we could still be on track to raise interest rates in January or even December, depending on what happens,” she said. Where does yen go?

South Korea Cosby Kosdaq stock rose 1.13% to 2,612.43, while the small-cap Kosdaq index rose 1.8%, ending at 740.48, bouncing off a six-week low.

Australia Standard & Poor's/ASX 200 It rose by 0.12% to close at 8,221.5.

Hong Kong's Hang Seng Index reversed losses to rise 0.18% as of the final hour, while mainland China's CSI 300 rose 0.2% to close at 3,964.16, after China reported its worst industrial profit numbers since the pandemic. China's industrial profits fell by 27.1% year-on-year in September.