The sweet price of the yen has reappeared, with several analysts estimating that the USD/JPY exchange rate may break through to levels of 150-155, challenging the highs of February this year.
The Japanese election puts pressure on the yen, which has fallen to its lowest since April.
Polls from various local Japanese media indicate that the ruling coalition led by the Liberal Democratic Party may not be able to retain its majority. However, regardless of the election results, government spending seems likely to increase. To attract voters, the Liberal Democratic Party is offering cash subsidies, while the opposition is pushing for an expensive plan to cut the sales tax.
Fiscal concerns have pushed Japan's government bond yields to multi-year highs. However, election anxiety has also put pressure on the yen, which has fallen to its lowest level since April this week. Short-term options betting on the yen against the dollar turned net bearish this week, marking the first sign of this in nearly a year, indicating the yen may face greater pressure.
The Japanese Senate election will be held on July 20 (Sunday).
Analysts predict the yen will depreciate to 155, with tariffs being the next hidden concern
U.S. President Trump's tariff policy has similarly impacted the yen significantly, casting a shadow of uncertainty over the direction of the Bank of Japan's policy. According to the latest data from the U.S. Commodity Futures Trading Commission as of July 8, the yen has weakened against all major currencies over the past three months, with leveraged funds reducing their long yen positions to the lowest level since early April.
Akira Moroga, chief market strategist at Aozora Bank, stated that the yen sell-off related to the Senate election is caused by speculative traders closing their long yen positions.
Shoki Omori, chief strategist at Mizuho Securities in Tokyo, said that if the ruling coalition significantly loses its majority, the USD/JPY exchange rate could rise to 155, marking the lowest level since February.
With the expansion of fiscal spending, the market may lose confidence in the yen.
However, some analysts believe that if the Liberal Democratic Party performs better than expected in the election, it would be good news for the yen. Mizuho Securities' Omori stated that if the ruling coalition retains its majority, the USD/JPY exchange rate could fall back to around 144.
However, as the August 1 tariff deadline approaches, the outlook for the yen may depend more on trade negotiations with the United States. Attention will turn to how Shigeru Ishiba negotiates with Trump on tariff issues.
This article discusses the sweet price of the yen reappearing! The uncertainty of election tariffs could see the yen depreciate to 155, first published on Chain News ABMedia.
