Stocks in Japan fell sharply on Monday after the country’s governing party chose a leader some view as hawkish on interest rates, underlining how central bank decisions continue to set the course of the world’s fourth-largest economy after decades of easy money policy.

Japan finds out its next leader on Friday when the ruling party of outgoing Prime Minister Fumio Kishida picks his replacement in a key vote that could affect the country’s political stability in coming months.

Japan ’s former defence minister, Shigeru Ishiba, has won the ruling Liberal Democratic Party’s (LDP) presidential election at his fifth and final attempt, defeating economic security minister Sanae Takaichi in a runoff vote.

Ishiba defeated economic security minister Sanae Takaichi in a runoff, after the two won the most votes in the first round in a crowded field of nine candidates.

A seasoned defence geek and a nationalist who would be Japan's first woman prime minister will go head-to-head in the final round of a ruling party leadership vote on Friday,