USD/JPY gains, but Ishiba tones down hawkish bias
2024.10.01 05:49
Investing.com – The recent nomination of incoming Japan Prime Minister Shigeru Ishib has prompted gains in the yen, but UBS doubts his appointment will substantially alter the speed of yen appreciation.
At 05:00 ET (09:00 GMT), traded 0.1% higher at ¥143.81, after falling as low as ¥142.09 on Friday after Ishiba won the leadership contest of the country’s ruling Liberal Democratic Party in a narrow victory.
Ishiba, a former defense minister, is a critic of past monetary stimulus and markets had been largely expecting a win for hardline nationalist Sanae Takaichi, a vocal opponent of further interest rate hikes.
However, Ishiba has toned down his hawkish bias in recent weeks, analysts at UBS said, in a note dated Sept. 30, including his comments to the local media over the weekend that “monetary policy must remain accommodative.”
Ishiba’s remarks are now aligned with BoJ Governor Ueda’s dovish comments at the September policy meeting, where he signaled that the BoJ will refrain from further rate hikes if the market remains unstable and added that yen strength has reduced the upside risk to inflation.
“In this context, we think the latest political developments in Japan still justify a more gradual JPY’s appreciation path, rather than an accelerated one,” UBS added.
Over the coming weeks, we will get more clarity on the policy inclinations of the incoming Ishiba administration, particularly from the formation of the new Cabinet members.
“Our USDJPY quarter-end forecasts currently stand at ¥147, ¥143, ¥140, and ¥138 through 3Q25, and we reiterate our preference to sell the USDJPY on rallies toward the ¥145-¥147 range to position for a longer-term decline,” UBS added.
