Japanese stocks fell heavily on Monday as traders in Tokyo reacted to the unexpected emergence of Shigeru Ishiba as the country’s next prime minister and the possibility that he might hold a general election within four weeks.

The closely watched Nikkei 225 index fell more than 4.2 per cent in the first hour of trading, led lower by property and exporter stocks as the market assessed the impact of a new leader who has spent little of his long political career focused on economics but appears keen to raise corporate taxes.

Officials close to Ishiba were cited in Japanese media as saying that the incoming prime minister might call for a general election on October 27, adding to the uncertainty hanging over the Tokyo market. One ruling party official confirmed to the Financial Times that an October snap election was “among a range of possibilities under discussion”.