Japan's stocks are declining following Shigeru Ishiba's victory.

• According to Ryota Abe, an economist at Sumitomo Mitsui Banking Corporation, the Bank of Japan will not encounter any political obstacles when raising interest rates again.
• When the yen is strong, exporters in Japan face pressure on their stock markets due to a higher interest rate, which makes their exports less competitive.

On Monday, Japan's stock market fell by 4%, due to a mixed set of economic data and traders' reactions to the election of new Prime Minister Shigeru Ishiba.

Japan's August retail sales increased by 2.8% year-on-year, surpassing Reuters poll predictions of a 2.3% increase, and higher than the revised 2.7% increase in July.

On Friday, Sanae Takaichi lost the final round of the Liberal Democratic Party election to Ishida, causing the yen to fluctuate.

According to Ryota Abe, an economist at Sumitomo Mitsui Banking Corporation, the Bank of Japan will not encounter any political obstacles when raising interest rates again.

When the yen is strong, exporters in Japan face pressure on their stock markets due to a higher interest rate, which makes their exports less competitive.

On Friday, the yen weakened against the dollar early on, but later strengthened after Ishiba won the runoff vote.

As expected, Ms. Takaichi won the run-off vote, causing the yen to reverse course.

Takaichi, an advocate for lower rates, had made it clear that she would not support the Bank of Japan's policy to raise interest rates in order to spur economic growth.

Pella Funds Management's managing director, Steven Glass, believes that inflation is still "imported" due to the weak yen, as he stated on CNBC's "Squawk Box Asia."

He argues that since it does not make sense for the BOJ to hike rates, it is crucial to increase our resolve that BOJ will not hike rates with Ishiba as prime minister.

In August, the decline in industrial production in Japan was 4.9% year on year, which was greater than the 0.4% drop seen in July.

Industrial production decreased by 3.3% on a month-on-month basis, which is a sharper decline than the 0.9% predicted in a Reuters poll and higher than the 3.1% increase seen in July.

Chinese rally puts pressure

On Monday, the Nikkei declined while China's markets surged, with the CSI 300 recording its best week since 2008 and Hong Kong's Hang Seng index achieving its largest weekly gain since 1998 on Friday.

On Monday, the CSI 300 increased by more than 6%, outpacing gains in Asia following the release of China's official purchasing managers' index for September, which was slightly better than the 49.5 forecast by economists surveyed by Reuters.

Magellan Capital's portfolio manager, Britney Lam, stated that Japan is often viewed as the "anti-China trade," meaning that when the Chinese market underperforms, the Japanese market tends to perform better.

"Given China's stimulus and shift in sentiment, the Japanese market will face pressure," she stated.

The People's Bank of China (PBOC) announced a series of stimulus measures last week, including reducing the reserve requirement ratio for banks and cutting short-term interest rates. Additionally, the PBOC stated that a mortgage rate cut announced last Monday will take effect at the end of October.