Japanese yen falls to three-month low amid loss of parliamentary majority
Japanese yen falls to three-month low amid loss of parliamentary majority
On October 28, the yen fell to a three-month low, trading above 153, as the results of Sunday's parliamentary elections are unlikely to foster political stability or strengthen the national currency.
Prime Minister Shigeru Ishiba’s Liberal Democratic Party of Japan and its ruling coalition partner, the center-right Komeito (Clean Government Party), secured 215 seats in the lower house of parliament, losing their majority.
Analysts believe that the new government is unlikely to have enough influence in parliament to implement a Bank of Japan (BoJ) interest rate hike.
As a result, the yen traded above 153 for most of the day, reaching 153.86, and only in the last few hours did the situation slightly stabilize.
It is quite possible that Japan is once again entering a period of political instability and frequent changes in government.
"This is another factor they need to consider when talking about the economy... Are we again facing a carousel of prime ministers every 10-12 months? That wouldn't be very good for the yen," Bart Wakabayashi of State Street told Reuters.
In the past four years, Japan has had four prime ministers, and increasing political instability will make the central bank even more cautious.
Unlike the yen, the U.S. dollar is on the rise, as the economy shows signs of strengthening. On Monday, two-year and 10-year bonds showed the highest monthly yield.
As previously noted, ING analysts suggest that by the time of the US elections on November 5, the USD/JPY exchange rate could approach the 153–155 range.
