Yen's Slide Continues as Takaichi's Victory Ushers Economic Policy Shift

The yen fell on Monday following Japanese Prime Minister Sanae Takaichi’s election victory, sparking expectations of fiscal stimulus. With a supermajority in parliament's lower house, Takaichi can implement policies despite lacking control of the upper chamber. Traders are anticipating a potential Federal Reserve policy easing later this year.

The yen's depreciation extended into Monday's Asian trading after Japanese Prime Minister Sanae Takaichi secured an electoral victory, paving the way for potential fiscal stimulus. The yen dropped to its weakest in two weeks, continuing its seven-day decline streak, to 157.72 yen against the dollar.

Takaichi is projected to gain 328 seats for her Liberal Democratic Party in the lower house, securing a supermajority with coalition partner, the Japan Innovation Party. This power enables Takaichi to push through fiscal policies despite not controlling the upper chamber.

Shoki Omori from Mizuho in Tokyo said the electoral results eliminate political uncertainties and refocus attention on fiscal policy design and communication. Meanwhile, speculations of policy easing from the Federal Reserve arise as Fed funds futures reflect a 19.9% chance of a rate cut in March, while other currency movements remain relatively stable.

(With inputs from agencies.)