<h1>Markets rally as new prime minister favors cheap credit, big defense spending, fiscal stimulus and wage promises</h1> Tokyo markets rallied after Japan's newly chosen prime minister signaled market-friendly policies-large defense spending and continued cheap credit-boosting hopes for growth even as inflation runs about 2.5-3 percent and wages remain near decades-old levels. The leader opposes interest-rate hikes, risking weaker currency and higher import-driven inflation, while pledging wage gains without specific measures. Demographic decline and labor shortages persist; proposed steps include tax incentives for employer childcare and family support, but structural and cultural barriers limit impact. Expect fiscal stimulus reminiscent of prior expansionary policies, a closer security alignment with the United States, and difficulty passing major reforms amid entrenched interests and a fragmented legislature.