The yen consolidated its strong gains on Wednesday, supported by the rise of the Japanese stock market and expectations of a landslide victory for Prime Minister Sanae Takaichi in the elections, which strengthens her position regarding fiscal policies.
The dollar witnessed volatility ahead of the release of the important US non-farm payrolls report later in the day, after a series of data that indicated a slowdown in the world’s largest economy.
The yen rose 0.1% to 154.22 per dollar, benefiting from its 1% rise in the previous session, as it also rose against other currencies.
Trading volume in Asia witnessed a decline due to Japanese markets being closed for the holiday.
“Such a landslide win gives the Takaichi regime better control over the downsides of Japanese government bonds and the yen,” said Vishnu Varathan, head of macro research for Asia at Mizuho.
He added: “It can pursue a more coherent fiscal policy… It certainly has a plan that makes sense numerically, so there should be no doubt about that. What it needed was the political capital to implement it, without having to make multiple concessions to multiple parties that want more (stimulus).”
The yen and Japanese government bonds rose in the wake of Takaichi’s big win, and investors also turned to Japanese stocks, anticipating that the stimulus would reach Japanese consumers and companies.
Foreign inflows into Japanese stocks are contributing to increased demand for the yen.
