The Japanese yen fell in Asian trading on Wednesday against a basket of major and minor currencies, extending its losses for the fifth consecutive session against the US dollar and hitting an eight-month low. The currency remains under pressure from continued selling amid mounting concerns over Prime Minister-elect Sanae Takaichi’s expected economic policies.
Following her victory as leader of Japan’s ruling Liberal Democratic Party (LDP), Takaichi — who is set to become the country’s next prime minister — pledged to stimulate Japan’s economy through aggressive fiscal spending while criticizing the Bank of Japan’s recent rate hikes.
Price Overview
• USD/JPY: The dollar rose 0.5% to ¥152.65 — its highest level since February — from an opening price of ¥151.90, after touching a low of ¥151.74.
• On Tuesday, the yen closed down roughly 1.05% against the dollar, marking its fourth consecutive daily loss amid heightened political developments in Japan.
Sanae Takaichi
Takaichi’s weekend victory in the LDP leadership race — making her Japan’s first female prime minister in modern history — has sparked widespread debate among investors regarding her upcoming economic agenda.
A close ally of the late Shinzo Abe, Takaichi is known for supporting the stimulus-heavy policies that defined “Abenomics.” This reinforces expectations that her administration may adopt an expansionary approach favorable for Japanese equities but potentially negative for the yen, as it would likely extend the era of ultra-loose monetary policy.
She reiterated her commitment to boosting the economy through large-scale fiscal spending and repeated her criticism of the Bank of Japan’s decision to raise interest rates.
Interest Rate Outlook
• Following Takaichi’s win, market pricing for a 25-basis-point rate hike at the Bank of Japan’s October meeting dropped from 60% to 25%.
• Yen swap markets now imply a 41% chance of a rate hike by December — down from 68% before the LDP leadership election.
Market Commentary
• Lou Brien, strategist at DRW Trading in Chicago, said: “There will be a period of adjustment as investors try to gauge how Takaichi’s policies will affect the currency.”
• Mohammed Al-Sarraff, foreign-exchange researcher at Danske Bank, noted: “The Bank of Japan may hold rates steady this month as a precaution, but by December it will likely have more data — and I expect another hike then.”
• He added: “Inflation remains too high, interest rates are still too low, and the rationale for another rate increase this year persists.”
