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.

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,