Tokyo: Japan's next prime minister, Shigeru Ishiba, is reportedly preparing to call snap elections on October 27, local media said Monday, as stocks plunged and the yen surged, reflecting investor fears of looming tax hikes.

Ishiba, set to be officially appointed as premier on Tuesday, supports the Bank of Japan's recent moves to hike interest rates and hinted at the possibility of raising corporate taxes. His surprise victory in the Liberal Democratic Party's leadership race on Friday sent the yen soaring to 142 per dollar from 146.50, as investors fled Japanese equities.

The Nikkei index fell by 5% on Monday, with major exporters like Toyota and Tokyo Electron taking heavy losses, down 7.9% and 7.3% respectively. Real estate giant Mitsui Fudosan also dropped by 8.3%.

Ishiba is reportedly finalizing plans to dissolve parliament on October 9 to pave the way for a general election later in the month. His win over Sanae Takaichi, a right-wing contender who favored the late Shinzo Abe's "Abenomics" policies, led to market jitters, as investors worry that Ishiba's fiscal policies could stifle growth.

With Japan facing economic challenges and a rising national debt, Ishiba's focus on defense and fiscal reforms is being closely watched. He has expressed strong support for bolstering Japan's defense capabilities and strengthening military ties in the face of rising tensions with China and North Korea. However, questions remain about how Japan will fund these defense upgrades amid its shrinking population and labor force.

Ishiba is expected to appoint Katsunobu Kato as finance minister and Gen Nakatani as defense minister, according to media reports. While markets remain on edge, Chief Cabinet Secretary Yoshimasa Hayashi assured that the government would continue monitoring financial trends and cooperate with the Bank of Japan to stabilize the economy.