- The Japanese yen traded around 153.30 yen against the US dollar on Tuesday, hovering near its three-month low and remaining under pressure from political uncertainty after Japan's ruling coalition lost its parliamentary majority in weekend elections.
- Political instability is challenging the Bank of Japan's plans to normalize monetary policy after decades of stimulus.
- Furthermore, the leader of the Democratic Party for the People also said that the Bank of Japan should avoid making major policy changes as real wages are now stagnant.
Meanwhile, the currency’s weakness prompted Finance Minister Katsunobu Kato to reiterate that authorities remain vigilant on foreign exchange movements. Moreover, financial markets fear that a further drop to the 160 level could increase the likelihood of another currency intervention. Externally, the Japanese yen continued to face pressure from a strong dollar amid expectations of a more cautious Fed rate cut and bets on a Trump victory in November.
According to stock trading platforms, Japanese stocks rise for a second session. According to trading, the Nikkei 225 index of Japanese shares rose 0.1% to around 38,660. Meanwhile, the broad TOPIX index rose 0.3% to 2,665 on Tuesday, rising for a second straight session as investors continued to assess the effects of the recent elections.
The ruling Liberal Democratic Party lost its parliamentary majority in the weekend elections, raising uncertainty about policy and further complicating the Bank of Japan’s interest rate hike plans. Meanwhile, economic data showed that Japan’s unemployment rate fell to 2.4% in September from 2.5% in August, the lowest in eight months.
Now, investors are looking ahead to the Bank of Japan’s policy decision next Thursday, when it is widely expected to keep interest rates on hold. Financial stocks led the attack, with strong gains from Mitsubishi UFJ (2.1%), Sumitomo Mitsui (1.6%) and Mizuho Financial (2%). Other heavyweights in the index also advanced, including Mitsubishi Heavy Industries (1.6%), SoftBank Group (1.9%) and IHI Corp (2%).
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USD/JPY Technical Analysis and Expectations Today:
We still expect the upward trend of the USD/JPY to continue until the reaction to the release of US jobs numbers and the Federal Reserve's preferred US inflation reading, and until the US presidential election is over. Therefore, any decline in the USD/JPY could be an opportunity to buy back in. Currently, the closest support levels for the USD/JPY pair are 151.90 and 150.00, respectively. Conversely, according to the daily chart performance, the initial upward trend will not be broken without moving below the support level of 148.00.
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