In a bold turn of events, the Japanese Yen lost some ground against the US Dollar after Prime Minister Sanae Takaichi’s party achieved a remarkable supermajority. This victory opens the door for increased government expenditure, prompting investors to dissect the impending fiscal plans.
The yen extended a string of recent losses in early Asian trading on Monday after Japanese Prime Minister Sanae Takaichi swept to victory in Sunday’s election, easing the path to further fiscal stimulus.
The yen slid as much as 0.3% to 157.72 yen against the dollar, its seventh consecutive day of decline, to reach its weakest level in two weeks.
Takaichi is projected to deliver as many as 328 of the 465 seats in parliament’s lower house for her Liberal Democratic Party. Alongside her coalition partner, the Japan Innovation Party, known as Ishin, Takaichi now has a supermajority of two-thirds of seats, allowing her to override the upper chamber, which she does not control.
“The Liberal Democratic Party’s landslide victory removes political uncertainty and strengthens policy execution, but shifts market focus squarely to how fiscal policy is designed and communicated,” said Shoki Omori, chief desk strategist for rates and FX at Mizuho in Tokyo.
“Risks from fiscal expansion had already been largely priced in before the election,” he added. “The key question now is whether those risks are reinforced or gradually unwind.”
The U.S. dollar index, which measures the greenback’s strength against a basket of six currencies, was last flat at 97.683, at the start of a week that will see the release of several key data releases, including retail sales, inflation and Wednesday’s delayed jobs report.
Traders are increasing bets of policy easing from the Federal Reserve later this year. Fed funds futures are now pricing an implied 19.9% probability of a 25-basis-point cut at the U.S. central bank’s next two-day meeting on March 18, compared to a 18.4% chance on Friday, according to the CME Group’s FedWatch tool.
The pound was last down 0.1% at $1.3598 as markets mulled developments in a political crisis swirling around British Prime Minister Keir Starmer, whose chief of staff, Morgan McSweeney, resigned on Sunday. McSweeney said he was taking responsibility for advising Starmer to name Peter Mandelson as ambassador to the U.S., despite his known links to Jeffrey Epstein.
Against the Chinese yuan trading offshore in Hong Kong, the U.S. dollar was last flat at 6.93 yuan.
The Australian dollar was last up 0.2% at $0.7028, while the New Zealand dollar nudged 0.1% higher to $0.6026 and the euro was flat at $1.1819.
Bitcoin was down 0.6% at $70,223.86, while ether slid 0.3% to $2,086.73.
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