Japan’s Ishiba vows to stay on after election setback - Bloomberg
Japanese Prime Minister Shigeru Ishiba said he intended to stay on even as his ruling coalition is certain to lose control of the upper house in Sunday's election, per Bloomberg.
While the vote does not directly determine whether Ishiba's government will fail, it adds political pressure to the leader, who had already lost control of the more powerful lower house in October.
The ruling Liberal Democratic Party and its ally Komeito lost their parliamentary majority, according to national broadcaster NHK, as the coalition failed to secure the 50 seats required to keep power. This is the first time since 1955 that a leader from the storied Japanese party would rule the nation without a majority in at least one of the legislative bodies.
Market reaction
At the time of writing, the USD/JPY pair is trading 0.15% lower on the day to trade at 148.58.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.