Last Friday, the yen strengthened after Shigeru Ishiba narrowly won the leadership contest of Japan’s ruling Liberal Democratic Party. The yen gained 1.88%, trading at 142.12 per dollar, having briefly touched 142.09. This marked the yen’s largest daily percentage increase since August 2. Over the week, the dollar fell 1.25% against the yen, positioning the yen for its third weekly gain in four weeks. 

(USDJPY Daily Price Chart, Source: Trading View) 

Japan’s incoming Prime Minister, Shigeru Ishiba, stated on Sunday that the country’s monetary policy must remain accommodative to support a fragile economic recovery. While Ishiba has been critical of the Bank of Japan’s previous aggressive monetary easing, it remains unclear if his recent remarks reflect a more dovish stance. 

On fiscal policy, Ishiba expressed his intent to introduce a set of measures soon to mitigate the impact of rising living costs, with a particular focus on assisting low-income households. Following his victory, Ishiba indicated that while monetary policy would remain broadly loose, he would not resist further gradual increases in Japan’s still near-zero interests rates. In August, Ishiba supported the BOJ’s decision to end negative rates and endorsed continued policy normalization, believing it could enhance industrial competitiveness. 

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