Yen Rises to Japan’s Uncertain Leadership Race
Key Points
- USD/JPY slipped to 150.72, marking its third straight session of declines.
- Traders reversed yen shorts as political uncertainty rose after the coalition breakup.
The Japanese yen strengthened for a third consecutive session on Thursday, with the USD/JPY pair falling to 150.72, as investors unwound bearish positions amid growing uncertainty over Japan’s political leadership.
The Liberal Democratic Party’s (LDP) coalition breakup with Komeito last week has disrupted expectations for a smooth succession of Sanae Takaichi as Japan’s next prime minister.
The LDP has proposed holding a leadership vote on October 21, but opposition parties have yet to confirm their participation, leaving the political outlook unsettled.
Traders who had bet on a weaker yen under Takaichi’s anticipated pro-spending stance have begun reversing those positions, with some returning to safe-haven assets amid the renewed political risk.
BoJ Stays Dovish, but Safe-Haven Flows Persist
Bank of Japan board member Naoki Tamura reinforced the central bank’s cautious stance, warning against tightening policy prematurely. He stressed the importance of avoiding a relapse into deflation and stagnant wage growth, signalling that ultra-loose monetary policy remains in place for the foreseeable future.
At the same time, the yen drew additional support from safe-haven inflows, fuelled by a weaker US dollar, rising US-China trade tensions, and the ongoing US government shutdown, which has heightened global risk aversion.
Technical Analysis
The USD/JPY pair is trading around 150.72, down 0.23%, as investors take profits following the pair’s recent climb to the 152.00 region, its highest level since July.
The retracement comes amid renewed speculation that Japanese authorities may intervene to curb excessive yen weakness, while the U.S. dollar cools off on softer Treasury yields and mixed macroeconomic data.
From a technical perspective, USD/JPY remains in a strong uptrend but is showing short-term exhaustion. After the rally from the 147.00 base, price action has begun to consolidate just below key resistance at 152.00.
The 5-day moving average has started to flatten, signalling slowing bullish momentum, while the 10-day MA is catching up as potential dynamic support. The next key support sits near 149.50, followed by 148.30, where previous consolidation occurred.
The MACD indicator also suggests early signs of weakening momentum with the histogram beginning to contract while the MACD line is curling toward the signal line, hinting at a possible short-term pullback.
However, the broader trend remains bullish as long as the pair stays above the 148.00–148.50 region.
Fundamentally, yen traders remain highly sensitive to any verbal intervention from the Bank of Japan (BoJ) or the Ministry of Finance.
With U.S. yields still relatively elevated and the BoJ maintaining ultra-loose policy, interest rate differentials continue to support the dollar. Yet, heightened volatility around the 152.00 mark means traders are cautious about adding new longs.
Outlook
The near-term bias for USD/JPY appears tilted to the downside as political uncertainty and safe-haven demand strengthen the yen. However, the broader trend will depend on signals from the Bank of Japan and the Federal Reserve, with markets now closely watching whether the yen’s recovery will persist beyond this correction phase.Publication date:
2025-10-16 11:21:35 (GMT)
