✅ Political Transition Eases Uncertainty — Focus Shifts to Bank of Japan Policy

✅ Political Transition Eases Uncertainty — Focus Shifts to Bank of Japan Policy

🏛 Politics: Prime Minister Takaichi’s Cabinet Launches — Market Cheers with Stock Gains & Yen Weakness

Sanae Takaichi officially took office today as Japan’s new Prime Minister, following the coalition agreement between the Liberal Democratic Party (LDP) and the Japan Innovation Party (Ishin). The political landscape is finally showing signs of stability.

In her inaugural press conference, Takaichi emphasized:

“The extraordinary Diet session will prioritize economic policy.”
“We aim to balance inflation control and growth support.”

Her remarks triggered stock gains and yen weakness in Tokyo markets.
However, the Nikkei 225 failed to break above the 50,000 mark, and some analysts argue that the “Takaichi Trade” has largely run its course.
From here, attention turns to economic recovery and the government’s ability to execute policies effectively.

💴 Bank of Japan: Diverging Views Ahead of Policy Meeting

With the BoJ policy meeting scheduled next week, media reports highlight an internal tug-of-war between hawkish and cautious board members.

• Hawkish tone: BoJ board member Takata stated, “The time is ripe for a rate hike.”

• Leaked reports:

  • Growth outlook likely to be revised slightly higher.

  • However, “No need to rush a rate hike in October,” according to some insiders.

These mixed signals dampened near-term rate hike expectations.
Some yen buying emerged briefly, but the contrast between the BoJ’s cautious tone and Takaichi’s pro-fiscal stance is drawing market attention.

Adding to the intrigue, newly appointed Finance Minister Katayama previously commented:

“The yen’s fair value is around the 120s.”
“A stronger yen is preferable for Japan’s economy.”

As a result, policy coordination among the government, BoJ, and Finance Ministry will be a key driver for FX volatility going forward.

🌍 Global Markets: Limited Data Flow — Canada’s CPI Takes the Spotlight

Today’s global economic calendar is light, leaving Canada’s September CPI as the sole key release:

• MoM: –0.1% (previous: –0.1%)

• YoY: +2.2% (previous: +1.9%)

An upside surprise could trigger CAD buying, but overall, markets are expected to remain directionless through the NY session.

💬 Key Events & Corporate Earnings

European Central Bank speakers:
Lagarde (ECB President), Lane (Chief Economist), Escrivá (Spain), and Holzmann (Austria) are all scheduled to speak at various conferences.

U.S. corporate earnings this week:
Netflix, Texas Instruments, General Electric, General Motors, 3M, and Coca-Cola.
→ The market’s focus may begin to shift from macro policy to corporate earnings and real economic data.

💹 London Session: Yen Selling Resumes — USD/JPY Rebounds to Upper ¥151s

In early London trading, USD/JPY rose from 151.10 → 151.68,
driven by renewed yen selling after Takaichi reiterated her commitment to economic stimulus.

📊 London Session Key Rates

✅ Summary

• The inauguration of Prime Minister Takaichi has temporarily stabilized Japan’s political outlook.

• Market focus now shifts to the BoJ’s upcoming policy decision, where internal divisions and fiscal-monetary coordination will be tested.

• USD/JPY’s ability to hold above ¥151.50–151.70 is the key short-term pivot.

• As the week progresses, traders will watch for whether yen weakness pauses or re-accelerates, setting the tone for late-October FX trends.