A new era began in Japan with the inauguration of the new Prime Minister Shigeru Ishiba.

Japan's capital market has experienced a dramatic "roller coaster ride".

Today, the Nikkei 225 index closed down 2.2% at 37,808.76 points, while the index closed down 5% last Friday and rebounded 1.93% on Monday;

Japan's Topix index closed down 1.4% at 2,651.96 points. It closed down nearly 4% on Friday and rebounded 1.69% on Monday.

The appreciation trend of the Japanese yen has eased, and the USD/JPY level once broke through the 144 mark today, with the latest price at 143.842.

Promises to end deflation

Yesterday, Japan's new Prime Minister Shigeru Ishiba officially took office, and the Kishida Cabinet collectively resigned at an extraordinary cabinet meeting.

Subsequently, Ishiba Shigeru formed a cabinet of 20 ministers, of which only two were women, less than half of the previous government, only seven had held cabinet positions before, and 13 were joining the cabinet for the first time.

Katsunobu Kato is appointed finance minister, having previously served as the government's chief spokesman. The new foreign minister is Takeshi Iwaya, a close friend of Ishiba and former defense minister. Hayashi Yoshimasa continues to serve as chief cabinet secretary.

Kato, a supporter of former Prime Minister Shinzo Abe's "Abenomics" expansionary fiscal and monetary policies, appeared to be appointed to ease concerns about the next cabinet's economic strategy.

At his first news conference, Ishiba pledged to continue efforts to resolutely end deflation and called on the Bank of Japan to maintain its loose policy to support efforts to boost prices and promote growth.

"The Japanese economy is on the verge of defeating deflation," Ishiba said. "We will implement economic and fiscal management and make achieving this goal a top priority."

“I will not comment on interest rates, but I expect the Bank of Japan to maintain its current stance and help us beat deflation,” he said.

Ishiba also said he would continue the broad economic policies of his predecessor, Fumio Kishida, which had driven steady wage growth and price increases in Japan.

Calls on the central bank to raise interest rates cautiously

Recently, Japanese Economy Minister Ryomasa Akazawa also said that Japan's new Prime Minister Shigeru Ishiba is not actively supporting the Bank of Japan's interest rate hike, which highlights the government's opposition to raising borrowing costs too early.

He said: "It is not necessarily accurate to say that Prime Minister Ishiba supports raising interest rates. There are various conditions that need to be met for raising interest rates, and the most urgent task is to overcome deflation."

Akazawa also pointed out: "I hope the Bank of Japan will be careful in its judgment. We must not take any measures to temporarily cool the economy. I think defeating deflation should be the top priority."

The comments by Akasawa, known for his close relationship with Ishiba, suggest the government is sending a signal to Bank of Japan Governor Kazuo Ueda against raising borrowing costs again too soon.

Moreover, Akazawa can attend the Bank of Japan's policy meetings, and his comments on the central bank are of particular importance.

Japan's main inflation gauge has been at or above its 2% price target for more than two years, but the government has yet to declare an end to deflation because it could still slip back into a state of falling prices.

Akazawa said the need to escape deflation once and for all had not changed, adding that real wages had only started to rise in the past few months.

There are signs that it will take some time for the new government to be confident that it has overcome the threat of deflation.

At the same time, the central bank's interest rate hike cycle has begun.

The Bank of Japan ended its massive monetary easing program in March and raised its policy rate to 0.25% in July.

Before Ishiba's surprise victory, most economists expected the central bank to raise rates further in January.

The Bank of Japan has repeatedly stressed that it will continue to raise interest rates if the economy and prices perform in line with expectations.