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Investor Sentiment to the Japanese Ruling Party Vote

FX analysts at leading financial institutions have reportedly terminated their previous recommendations for holding a long position on the yen following Japan’s leading political group selected Takaichi as the new leader.

In commentary named “Getting out of the yen,” a global head for currency analysis stated:

We held a long yen position in our FX Blueprint but are now getting out after the LDP election outcome. The unexpected win by Takaichi creates renewed unpredictability regarding Japan’s policy priorities and the expected date of BoJ monetary tightening.

Experts agree that rising prices are an issue in Japan, but doubts are resurfacing on how it will be dealt with.

The strategist additionally noted evidence of political control within Japan (in which politicians direct monetary policy decisions) represent a downside risk.

Gold Approaches $4,000 per ounce Level

Bullion values are hitting unprecedented levels, again, in its top-performing period since the late 1970s.

The immediate value of gold has climbed by 1% or more today reaching $3,944/oz, as it closes in on the $4000/oz mark.

This shows bullion prices has increased fifty percent from the beginning of the year, on track for its top annual returns since the late 1970s.

The metal has risen this year due to multiple reasons, among them increasing fears that government debts may be unmanageable.

The new leader’s success in Japan is likely amplifying apprehensions that leaders will attempt to stimulate the economy by borrowing more and cheaper credit, and depend on rising prices to erode the value of new borrowings.

Market Overview

Japan’s stock market has surged to a record high this morning, as the yen falls, after the top position of the country’s ruling party went unexpectedly to by spending advocate Takaichi.

Forecasts that Takaichi will be a leader supporting government spending has triggered a wave of enthusiastic buying driving Japan’s benchmark index to a 5% gain, adding over 2300 points ending at 48,085.

However, the currency is trending the opposite way – it dropped almost 2% relative to the USD reaching 150.3 against the greenback.

Takaichi, set to be the nation’s initial woman PM soon, is a known fan of Margaret Thatcher. However, while she holds conservative views regarding social issues, Takaichi takes an un-Thatcherite approach on budget matters, and promotes increased public expenditure and loose monetary policy.

As such, analysts anticipate to maintain the national effort to boost economic growth via government outlays and reduced borrowing costs, likely resulting in rising inflation and increased borrowing.

As a result yen depreciation, as investors anticipate fewer interest rates hikes in Tokyo compared to earlier expectations.

The nation’s debt securities have declined today, lifting the return on thirty-year bonds near to peak levels, because of predictions of increased debt issuance and sustained inflationary pressures.

The markets are evaluating the degree to which the new leader’s plans will resemble the policies of Shinzo Abe advocated by previous leader Shinzo Abe.

One analyst commented:

Different from previous comments, she has not engaged from promoting the three-arrow strategy in this LDP leadership campaign, but experts understand her core beliefs and her support of the former PM’s Three Arrows strategy.

Markets could then push for more information regarding her stance, as well as exactly how influential she may be in shaping the central bank’s decisions, ahead of the BoJ’s next meeting is seen as a key event with a quarter-point increase considered likely...

Market Agenda

• 8.30am BST: European construction data for September
• 9.30am BST: UK building sector data for the last month
• 6.30pm BST: Bank of England governor the BOE’s Andrew Bailey to speak at Scotland’s Global Investment Summit 2025