🔗 Share this article

Investor Sentiment following Japan's Ruling Party Vote

FX analysts from prominent banks have reportedly exited their strategies to hold an optimistic view on Japan’s currency after the country’s governing party chose Takaichi to be its head.

In a report named “Leaving yen positions,” one chief for currency analysis commented:

We went long JPY as part of our strategy but have closed this due to the party leadership vote. The unexpected win by Takaichi creates significant doubt regarding Japanese economic goals and the expected date of BoJ monetary tightening.

There is agreement that inflation is a problem in Japan, but uncertainty is now going up again about the approach to managing it.

The analyst additionally noted evidence of political control in Japan (where state authorities influence the central bank’s actions) represent a downside risk.

Gold Approaches $4,000 per ounce Mark

Bullion values are reaching unprecedented levels, today, in its top-performing period in over four decades.

The immediate value of bullion has jumped by 1% or more today to $3,944 per ounce, nearing the $4,000 threshold.

This indicates gold’s value has jumped fifty percent since January 1st, on track for its strongest yearly performance in over 45 years.

The metal has risen this year due to multiple reasons, among them growing worries that national debt levels are unsustainable.

Sanae Takaichi’s success in the party vote will only have reinforced worries that leaders may try to stimulate the economy through higher borrowing and cheaper credit, and depend on rising prices to reduce the real value of new borrowings.

Market Overview

Japan’s stock market has surged to a record high today, as the yen falls, following the leadership of the LDP was unexpectedly secured by spending advocate Sanae Takaichi.

Predictions that Sanae Takaichi is likely to be a leader supporting government spending has ignited a rush of positive investment lifting the Tokyo stock index higher by five percent, adding 2315 points to finish at just over 48,000.

But the yen is heading in the other direction – it has fallen almost 2% relative to the USD reaching 150.3 against the greenback.

Takaichi, set to be Japan’s first female prime minister later this month, is a known fan of Margaret Thatcher. Yet even though she holds conservative views in social matters, the new leader follows a contrasting path in economic policy, and has advocate higher state investment and easy money policies.

Therefore, markets predict to persist with the national effort to stimulate its economy though fiscal spending and reduced borrowing costs, potentially causing increased price pressures and greater borrowing.

Thus the weaker yen, as investors anticipate reduced rate increases by Japanese authorities relative to previous forecasts.

Japan’s government bond values have also fallen in Monday trading, lifting the yield on thirty-year bonds close to record highs, on expectations of more government loans and more persistent inflation.

The markets are evaluating how closely the new leader’s plans will echo the Abenomics strategy implemented by previous leader Shinzo Abe.

One analyst commented:

Unlike in late 2024, she has not engaged from highlighting the Abenomics program in this LDP leadership campaign, but experts understand her fundamental position and her appreciation of Abe’s three-pillar strategy.

Investors might thus seek for more information on that position, as well as exactly how influential she could be in directing the BoJ’s policy thinking, ahead of the BoJ’s next meeting is viewed as a key event and a rate rise potentially on the table...

Today’s Schedule

• 8:30 AM UK time: European construction data for last month
• 9.30am BST: British construction figures for the last month
• 6:30 PM UK time: Central bank head Andrew Bailey to give keynote speech at Scotland’s Global Investment Summit 2025