Japan’s Nikkei 225 jumps 2% as Prime Minister Suga bows out of governing party’s leadership race

SINGAPORE — Shares in Japan jumped on Friday after Prime Minister Yoshihide Suga said he will not be running in the upcoming leadership election.

The Nikkei 225 closed 2.05% higher at 29,128.11 while the Topix index finished the trading day 1.61% higher at 2,015.45. Japanese manufacturing stocks saw big gains, with Fanuc jumping 3.46% while JFE Holdings surged 6.49%.

The Japanese yen traded at 109.97 per dollar, still stronger than levels around 110.4 seen against the greenback earlier this week.

Suga bowing out of the leadership race for his party paves the way for a new prime minister. Suga has been under fire for his handling of the Covid situation in Japan, which included the hosting of the Tokyo Summer Olympic Games while the city was under a state of emergency.

“The cabinet approval rate has come down a lot and the Japanese people’s confidence has become much weaker,” Hiromichi Shirakawa, chief economist for Japan at Credit Suisse, told CNBC’s “Capital Connection” on Friday.

“Under the continuous state of emergency declaration and soft lockdowns, we haven’t yet seen light at the end of the tunnel,” Shirakawa said, adding that the next Japanese prime minister’s job is to restore the confidence of people who are “fairly exhausted,” rather than coming up with concrete economic fiscal policy.

Elsewhere, mainland Chinese stocks closed lower, with the Shanghai composite down 0.43% to 3,581.73 while the Shenzhen component slipped 0.683% to 14,179.86.

The Caixin/Markit services Purchasing Managers’ Index came in at 46.7, against July’s reading of 54.9. Earlier this week, the official non-manufacturing PMI for August showed contraction in the sector for the first time since early 2020.

PMI readings above 50 represent expansion, while those below that level signal contraction. PMI readings are sequential and represent month-on-month expansion or contractions.

Hong Kong’s Hang Seng index shed 0.72% to close at 25,901.99. Hong Kong-listed shares of Alibaba fell 3.57% following reports that the firm is set to invest 100 billion yuan (about $15.5 billion) by 2025 for “common prosperity.”

South Korea’s Kospi climbed 0.84%. In Australia, the S&P/ASX 200 gained 0.5% to close at 7,522.90.

MSCI’s largest index of Asia-Pacific shares outside Japan rose 0.34%.

Overnight stateside, the Dow Jones Industrial Average jumped 131.29 points to 35,443.82 while the S&P 500 advanced 0.28% to 4,536.95. The Nasdaq Composite edged 0.14% higher to 15,331.18.

Those gains on Wall Street came ahead of the U.S. employment report for August, set for release Friday at 8:30 a.m. ET.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 92.218 — off levels above 92.7 seen earlier in the week.

The Australian dollar changed hands at $0.743 following its climb earlier in the week from below $0.732.

Oil prices were lower in the afternoon of Asia trading hours, with international benchmark Brent crude futures falling 0.53% to $73.42 per barrel. U.S. crude futures dipped 0.21% to $70.13 per barrel.