Lawmakers of Japan’s ruling party will vote on Monday whether to hold an extraordinary leadership election that could oust embattled premier Shigeru Ishiba and have a significant impact on the world’s fourth largest economy. Concern over political uncertainty has led to a sell-off in the yen and Japanese government bonds (JGB) this week, with the yield on 30-year bonds hitting a record high on Wednesday. While the policy paralysis around such a vote could add pain for an economy hit by U.S. tariffs, markets are focusing more on the chance of Ishiba’s replacement by an advocate of looser fiscal and monetary policy such as Sanae Takaichi, who has criticised the Bank of Japan’s interest rate hikes. “The dominant market bet is for the LDP to hold a leadership race and for Ishiba, known as a fiscal hawk, to lose his job,” said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management. “We’ll likely see further selling in Japanese government bonds, as whoever succeeds Ishiba probably will be more open to loosening fiscal policy than him.”

Full report : Japan’s Ishiba may face leadership challenge on Monday.