TOKYO: Japan’s benchmark Nikkei share average plummeted on Monday in reaction to a sharply stronger yen after perceived monetary policy hawk Shigeru Ishiba won a leadership contest to become the country’s prime minister.

The Nikkei ended the day down 4.8% at 37,919.55, while the broader Topix index shed 3.5%.

Japanese government bond yields jumped, with those on benchmark 10-year notes rising 4.5 basis points (bps) to 0.85% and two-year yields climbing 7 bps to 0.385%.

A critic of the Bank of Japan’s extraordinary stimulus of the previous decade, Ishiba beat monetary-policy dove Sanae Takaichi in a close contest on Friday that was decided after share and bond markets had already closed. He is due to become premier on Tuesday.

Ishiba’s current stance is less clear, as he told national broadcaster NHK at the weekend that “monetary policy must remain accommodative as a trend given current economic conditions.”

At the beginning of August, he had said the BOJ “is on the right policy track” after the central bank’s exit from negative interest-rate policy in March and its follow-up rate hike in July.

The picture is complicated further by Ishiba’s reported choice of finance minister, Katsunobu Kato, who in May called for continued normalisation of monetary policy.

“This leadership change adds a layer of uncertainty” for the yen, said Charu Chanana, head of FX strategy at Saxo.