After he was announced as prime minister, Shigeru Ishiba pledged to devote himself to regain trust, revitalise the economy and address security threats. He is expected to be appointed to the role on Tuesday.

Last Friday, Japan’s governing party chose former defence minister Shigeru Ishiba as its leader; he had already won the presidency of the ruling Liberal Democratic party (LDP) in a closely contested run-off vote, making him the next prime minister.

After the announcement, Ishiba pledged to devote himself to regain trust, revitalise the economy and address security threats. He is expected to be appointed to the role on Tuesday.

Japan's economic fortunes, as seen by the revival of interest in its stock market around the world, have improved significantly in recent years, aided by corporate governance reforms, for example. Sectors which have been relatively small are starting to gain ground, such as venture capital. See here and here for more commentaries.

“We see prime minster Ishiba’s appointment as a positive. Endorsement of the Bank of Japan’s (BoJ) policy normalisation is a key benefit for markets, in addition to a pro competition and reduced fiscal stance,” Alex Everett, investment manager at investment manager abrdn, said.

“Together, this should support the yen and enable a continued modest shift higher in front end JGB yields. As ever, political support remains the risk, and we are mindful of the significant effort required to regain the public’s trust following the slump in LDP approval under prime minister Kishida,” he added.

“Ishiba, a many time candidate, saw off competition from Takaichi in the last round. This result was a surprise as he had been behind Takaichi after the first round of voting. It seems that even Ishiba was surprised!” David Mitchinson, senior portfolio manager at specialist Japan boutique Zennor Asset Management, said.

“Whilst always popular with the LDP party members, he has finally managed to win over enough of his diet colleagues who have been reluctant to support him before. His lack of a strong personal franchise in parliament may constrain his ability to act. It seems that the LDP was not ready to move to the next generation leaders such as Koizumi and Takaichi who so far lack senior cabinet experience. We would expect that they both receive senior roles. They’ll be back…,” Mitchinson continued.

In the wake of trade tensions between the US and China, Ishiba is seen as being relatively dovish on China (a more equal relationship with US policy) but as defence minister he has advocated forcefully and successfully for a bigger defence budget; and in favour of fiscal steps to reduce the deficit including higher interest rates. “This is a classic ministry of finance supported position,” he added.

Ishiba is thought to be less interested in reform and represents a bigger change in policy stance than Takaichi would have been. In his latest book he referenced prime minister Ishibashi, the great rival of Kishi (Shinzo Abe’s grandfather), as his inspiration and he has been personally opposed to Abe for much of his career. “At the least, we should assume that political pressure around a reflationary policy framework including to keep interest rates very low will be reduced, giving the BoJ more flexibility,” Mitchinson said.

Meanwhile, Katsunori Ogawa at Sumi Trust remains positive about Japan's economic outlook and stock market, particularly the semiconductor industry. He believes that many stocks are undervalued and attractive investment opportunities can be found there. The improvement in corporate governance has been a huge positive for Japan. See more commentary here.