Here’s why Japan’s stocks are plunging after Shigeru Ishiba’s win

Japan's Nikkei 225 tumbled over 4% on Monday, following a mixed set of economic data out of Japan and as traders reacted to the election of incoming Prime Minister Shigeru Ishiba.

Japan's August retail sales climbed 2.8% year on year, beating Reuters poll estimates of a 2.3% rise, and up from a revised 2.7% rise in July.

Ishida had beaten Economic Security Minister Sanae Takaichi in the final round of the Liberal Democratic Party election on Friday, sending the yen into a volatile session.

That means the Bank of Japan "will not face any political hurdle for hiking rates further," Ryota Abe, economist at the global market and treasury department of Sumitomo Mitsui Banking Corporation, told CNBC.

A higher interest rate typically strengthens the yen and puts pressure on Japanese stock markets, which are heavily weighted by exporters. A strong yen would then make their exports less competitive.

The yen had weakened against the dollar early on Friday as Takaichi won the first round of voting, but later reversed course and strengthened as Ishiba won the runoff vote after markets closed.

Abe noted the yen had reversed course "as almost all market participants including SMBC and other political analysts had expected Ms. Takaichi to win in the run-off vote."

Takaichi is an advocate for lower rates, and had clearly stated her stance that she would not support the Bank of Japan's policy to raise interest rates to spur economic growth, he added.

Steven Glass, managing director at Pella Funds Management, holds a different view, telling CNBC's "Squawk Box Asia" that inflation is still very much "imported" owing to the weak yen.

He adds that because of that, "it does not make sense" for the BOJ to be hiking rates, and he also sees that with