USD/JPY: Japan’s Political Drama Fuels Surge Amid Mixed Economic Data

3 weeks ago

1 minute read

2024.09.30 10:38

The Japanese yen has steadied on Monday after posting huge gains on Friday. is trading at 142.43 in the European session, up 0.15%.

Incoming PM Ishiba Says He’ll Call Snap Election

The yen soared on Friday but it was in response to political rather than economic developments. The ruling Liberal Democratic Party (LDP) unexpectedly chose Shigeru Ishiba as its new leader and he will take over as Prime Minister on Tuesday. Ishiba’s win was a surprise as Economic Minister Sanae Takaichi was expected to win the LDP leadership race.

The financial markets reacted sharply – the Japanese yen soared 2.1% on Friday while the Japanese stock market is sharply lower today. Takaichi is a strong supporter of lower interest rates while Ishiba favors the Bank of Japan’s moves towards normalization. Ishiba said today that he will call a snap election on October 27, which he is almost certain to win. Ishiba’s election would be a green light for the BoJ to continue tightening policy which would make the yen more attractive to investors.

Overshadowed by the political drama was Monday’s Japanese data, which was a mix. slid 3.3% m/m in August, after a 3.1% gain in July and well short of the market estimate of -0.9%. Yearly, industrial production declined 4.9%, compared to a 2.9% gain in July.

There was better news from retail sales, which rose 0.8% m/m in August, up from 0.2% in July and a three-month high. Yearly, climbed 2.8%, up from a revised 2.7% in July and above the market consensus of 2.3%.

US Core PCE Drops to 0.1%

Inflation remains under control and this was reiterated on Friday by the , the Fed’s preferred inflation indicator. The index rose 0.1% m/m in August, a three-month low. This was down from 0.2% in July and below the market estimate of 0.2%. Yearly, ticked up to 2.7%, after three consecutive months at 2.6% and in line with expectations. USD/JPY-4-Hour Chart