The yen has underperformed all its major peers in the past three months, and it may be at risk of further declines as political risks mount.
Strategists are bearish on the currency, predicting that Japan’s election outcome will drive up government expenditure, while the impact of U.S. tariffs may still slow the pace of interest-rate hikes. The sentiment jives with the view of options traders who are positioning for another drop in the yen.
The ruling Liberal Democratic Party’s loss in the July 20 Upper House election has become the defining factor for Japan’s currency as analysts warn that Prime Minister Shigeru Ishiba may resort to populist spending to shore up support for his weakened coalition. Traders are looking to a central bank policy decision due Thursday for the next cue, with officials said to be seeing the possibility of mulling another increase this year.
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.