The yen faces risks due to Japan’s leadership change, following Prime Minister Shigeru Ishiba\u2019s resignation. The choice of successor is expected to influence the yen’s value and the Bank of Japan’s policies. Sanae Takaichi is considered yen-negative, supporting easy monetary policy and fiscal stimulus, whereas Shinjiro Koizumi is seen as a reformist.<\/p>\n
Michael Wan from MUFG Bank suggests the yen could remain weak in the near term. The Bank of Japan may delay further rate hikes until the political situation becomes clearer. The yen started weak with Ishiba’s resignation, leading to the USD\/JPY rate at approximately 148.10, following a drop after the news.<\/p>\n
There will likely be a date announced for the leadership election soon, possibly in early October. Japan’s media reports suggest the ruling party will hold elections around this time to choose a new leader. This decision is expected to be decisive for the market, especially concerning the yen and Japanese economic policies.<\/p>\n
We are seeing the yen weaken significantly with Prime Minister Ishiba\u2019s resignation, pushing the USD\/JPY cross toward 148.10. This political uncertainty means the Bank of Japan will likely pause any further interest rate hikes. The focus now shifts to the ruling party’s leadership election, expected in early October.<\/p>\n
Given the wide range of potential policy outcomes, we anticipate a sharp rise in implied volatility for yen currency pairs over the next month. Buying options, like straddles or strangles on USD\/JPY, could be a prudent strategy to profit from a large price move, regardless of direction. We saw a similar spike in volatility during the LDP leadership transition back in 2021, and this situation appears even less certain.<\/p>\n
If Sanae Takaichi gains traction as a frontrunner, we should prepare for further yen weakness due to her strong support for aggressive monetary easing. This scenario would make buying USD\/JPY call options or entering long forward contracts attractive, potentially targeting levels above the 150 mark. This view is supported by the latest core inflation data from August 2025, which at 1.9%, gives a dovish BOJ candidate plenty of room to delay policy tightening.<\/p>\n
Conversely, if a more reform-minded candidate like Shinjiro Koizumi emerges as the favorite, the market may price in a faster path to policy normalization. In this case, the yen could abruptly reverse its recent losses, making protective put options on USD\/JPY a necessary hedge against long positions. After the small rate hikes we saw earlier this year, any sign of a more hawkish stance could cause a rapid unwinding of yen short positions.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Japan’s leadership change stirs yen volatility; successor’s policy stance could shape BoJ moves and economic outlook.<\/p>\n","protected":false},"author":62,"featured_media":17042,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-30333","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/30333","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=30333"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/30333\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17042"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=30333"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=30333"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=30333"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}