Japan Stocks Plunge After Prime Minister Election; Shanghai benchmark rises more than 5%

HONG KONG (AP) — Asian markets had a wild start to the week, with the Nikkei 225 index in Tokyo plunging nearly 5%, while Chinese markets surged on news of fresh stimulus for the faltering economy.

Japanese stocks fell after the ruling Liberal Democrats chose former defense minister Shigeru Ishiba to replace Prime Minister Fumio Kishida, who is due to step down on Tuesday.

Ishiba has expressed support for the Bank of Japan’s moves to raise interest rates from their near-zero levels. He also supports other measures, such as a possible increase in corporate taxes, that are seen as less market-friendly than his main rival for the top job, Economic Security Minister Sanae Takaichi, whom he defeated in a runoff election late Friday.

The Nikkei was down 4.7% at 37,956.32 at midday on Monday.

The dollar fell from above 146 yen to below 143 yen after the ruling party’s vote ended late Friday. By mid-Monday, the price was 142.49 yen, up from 142.29.

Exporter stocks fell as a stronger yen hurts Japanese companies that generate much of their sales and profits abroad.

Toyota Motor Corp. fell by 3.5%. Shares of Honda Motor Co. fell 4.1% and those of Nissan Motor Co. fell 5.8%.

Ishiba said he supported Kishida’s “new capitalism” policy, which would supposedly promote a more equal distribution of the national wealth. But soaring prices have undermined progress in encouraging consumers to spend more.

Meanwhile, the Hang Seng in Hong Kong rose 3.3% to 21,321.97, with the Hang Seng Mainland Properties Index in Hong Kong gaining 8.6%. The Shanghai Composite Index rose 5.7% to 3,263.59.

The rallies came at an opportune time as they came on the eve of a week-long national holiday marking the 75th anniversary of communist rule in China. Markets in mainland China will remain closed from Tuesday to October 7th.

China is pushing ahead with measures announced last week to support the real estate industry and revive flagging financial markets. The central bank announced on Sunday that it would direct banks to reduce mortgage rates on existing home loans by October 31. Meanwhile, the southern city of Guangzhou lifted all home buying restrictions over the weekend, while both Shanghai and Shenzhen announced plans to ease key purchasing restrictions.

The effort to pull the housing market out of a prolonged downturn comes at a time when the economy is showing signs of further slowing. China’s manufacturing activity contracted for the fifth straight month in September as the official purchasing managers’ index stood at 49.8, below the 50 mark that separates expansion from contraction, according to National Bureau of Statistics data released on Monday.

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Elsewhere in Asia, Australia’s S&P/ASX 200 rose 0.7% to 8,273.10. South Korea’s Kospi fell 0.9% to 2,627.13.

On Friday, the S&P 500 fell 0.1% from its all-time high to 5,738.17. The Dow Jones Industrial Average rose 0.3% to 42,313.00, setting its own record, while the Nasdaq Composite slipped 0.4% to 18,119.59.

Treasury yields in the bond market fell after a report showed inflation slowed slightly more in August than economists had expected. Similar figures were carried over from earlier this month on inflation, but Friday’s report resonates because it is the measure Federal Reserve officials prefer to use.

The Fed kept its key interest rate at a two-decade high for more than a year, hoping to slow the economy enough to push inflation toward its 2% target. With inflation having eased significantly since its peak two summers ago, the Fed has begun cutting interest rates to improve conditions for the weakening labor market and prevent a recession.

The risk of a downturn remains and U.S. employers have slowed hiring. An inflation report on Friday showed that U.S. consumer spending growth fell short of economists’ expectations in August.

In other business Monday, benchmark U.S. crude oil rose 40 cents to $68.58 a barrel. Brent crude, the international standard, rose 45 cents to $71.99 a barrel.

The euro traded at $1.1158, down from $1.1163.