Key Points
- USD/JPY rose 0.4% to 151.38, extending gains after Takaichi’s election.
- Traders expect fiscal stimulus but continued caution on monetary tightening from the Bank of Japan.
The Japanese yen fell against the dollar on Tuesday after Sanae Takaichi secured her position as Japan’s first female prime minister, with investors pricing in a more uncertain policy path that could delay any meaningful tightening by the Bank of Japan (BOJ).
The USD/JPY pair climbed 0.4% to 151.38, marking a third consecutive day of gains as traders positioned for extended fiscal support and a cautious central bank stance. The move followed Takaichi’s decisive victory in the lower house vote, backed by the right-wing opposition Ishin party, which cleared the way for her inauguration later in the day.
Policy Implications
Takaichi’s leadership is widely seen as supportive of fiscal expansion, though analysts suggest the scale of stimulus will be limited.
At the same time, her incoming finance minister, Satsuki Katayama, has previously signalled a preference for a stronger yen, which could temper speculative bets against the currency.
Markets will be watching closely for the policy direction taken by the new cabinet, particularly regarding Japan’s debt sustainability and domestic consumption measures.
HSBC’s chief Asia economist Fred Neumann noted that political timing could influence monetary policy decisions: “There may be considerations to delay tightening until fiscal easing gains traction. The BOJ is caught between a rock and a hard place.”
Technical Analysis
The USD/JPY pair rebounded to 151.34, up 0.40%, as buyers regained control following a short-lived correction from the 153.27 high. The move reflects persistent dollar strength underpinned by elevated U.S. yields and resilient economic data, while the yen remains pressured by the Bank of Japan’s commitment to ultra-loose policy.
From a technical perspective, the uptrend remains intact, with the pair finding support above the 150.00 psychological threshold, a key zone that previously acted as resistance. The price has bounced off the 10-day moving average, suggesting that dip buyers are still active.
If momentum holds, a retest of 152.50–153.00 appears likely, while failure to sustain above 150.50 could expose downside toward 149.80.
The MACD indicator shows stabilising momentum: although the lines recently crossed to the downside, the histogram is narrowing, signalling potential for a bullish reacceleration.
Short-term consolidation between 150.50–152.50 seems probable before any decisive breakout.
On the fundamental front, the yen’s weakness continues to draw scrutiny. Traders are wary of potential intervention by Japan’s Ministry of Finance, given that the 152–153 range has historically prompted government action. Still, strong U.S. data and ongoing rate differentials keep the dollar in favour.
Wider Market Tone
Elsewhere, the US dollar index (USDX) edged up 0.16% to 98.77, with traders awaiting next week’s Federal Reserve policy meeting. Expectations of a 25-basis-point rate cut continue to anchor the greenback, though market participants remain cautious about the Fed’s guidance for December.
The overall tone in global markets was moderately upbeat after US President Donald Trump expressed optimism about reaching a trade deal with China, while White House adviser Kevin Hassett suggested that the prolonged US government shutdown could end this week.
