The Japanese yen has weakened sharply since Sanae Takaichi's election victory, with the dollar rising over 2% against the yen and Japanese stocks climbing nearly 5%. This market reaction reflects renewed expectations for looser fiscal and monetary policy, as Takaichi - known for supporting Abenomics - signals a shift to the right.
While these changes have raised concerns about fiscal discipline and the Bank of Japan's approach to policy tightening, recent appointments of former Finance Minister Suzuki and ex-Prime Minister Aso suggest a continued focus on fiscal responsibility. Although fears of fiscal dominance have pressured the yen, Takaichi has emphasized responsible fiscal activism, and investors are watching to see if the Bank of Japan will delay tightening or move to raise rates later this year.
Looking ahead, further yen weakness may be limited by already low currency levels, domestic inflation concerns, and the risk of US trade retaliation if the yen continues to slide.
Watch the full analysis in the video below.
Key points
- 00:26 - What has been the initial market impact from the Sanae Takaichi winning the LDP leadership election?
- 01:58 - Is the JPY sell-of justified?
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