The Japanese yen saw a modest surge following the Upper House election on Sunday, but analysts remain skeptical of its staying power.
Bounce of the Japanese Yen Short-Lived as Political Risk Looms
On paper, the market welcomed the fact that Prime Minister Shigeru Ishiba will remain in power despite the ruling coalition losing its majority.
But the tone is far from celebratory.
BoJ Stays Dovish in the Face of Uncertainty
The Bank of Japan, already cautious about raising rates, now has even more reason to remain dovish. Heightened political risk tends to favour policy stability over experimentation, and with the spectre of trade tension looming, the BoJ may lean on continuity rather than tightening. This adds an undercurrent of softness to the outlook of the Japanese yen.
USD/JPY Technical Analysis
USD/JPY slipped to 147.88 by the Monday close, briefly testing intraday lows near 147.69 on the back of political headlines.
Remaining under heavy selling pressure with a sequence of lower highs and lower lows, the MACD histogram is firmly negative and expanding. Price also remains decisively below the 30-MA, reinforcing the intraday bearish structure.
Picture: USDJPY struggles beneath 148.00 as momentum fades. A break below 147.69 opens the door to deeper decline, as seen on the VT Markets app
The recent move comes amid growing caution from traders following mixed comments from BoJ policymakers last week, where Governor Ueda hinted that “exit from ultra-loose policy will remain gradual.”
Meanwhile, a firmer US dollar has failed to keep USD/JPY afloat, suggesting potential haven demand for the yen is resurfacing. If 147.69 breaks, eyes shift to the next psychological level at 147.50.
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