On Friday, Japan's newly elected Liberal Democratic Party President, Shigeru Ishiba, announced that fiscal stimulus would be deployed if necessary without disrupting the current monetary policy's easing trend. Ishiba stated that the Bank of Japan (BoJ) should independently determine its monetary policy while maintaining close cooperation with the government without any demands on the BoJ's policy.
In reaction, the USD/JPY saw a quick rise of approximately 50 points to around 143.10 yen. Currently, the pair is down 1.25%, trading at 143 yen.
Ishiba, previously seen as a supporter of continued interest rate hikes, emphasized the need for fiscal stimulus without altering the BoJ's easing trend. This statement caused a brief spike in USD/JPY by about 50 points, now standing at 143.10 yen, while its current trade is at 143 yen, down 1.25%.
Global markets have been closely watching the yen since early August when rapid closing of yen carry trades caused volatility. Masasaku Kameda, former Chief Economist at the Bank of Japan and now Executive Economist at Sompo Institute Plus, noted that financial markets were anxious about the election results, but the outcome does not signify major changes in Japan's economic policies.
Shigeru Ishiba, 67, a veteran member of the Liberal Democratic Party, has held several high-ranking positions and is viewed as a proponent of BoJ's gradual rate hike plan. Ishiba defeated opponent Sanae Takaichi in the second round of the party election. Takaichi had recently remarked that raising interest rates now would be "foolish." Analysts believe the yen's decline before the results was due to market expectations of Takaichi's win.
"The market clearly prepared for Takaichi's victory," analysts said. "The strong reaction to Ishiba's win, including the yen's surge, is an example."
