FX.co ★ Yen Weakens Amid Political Uncertainty

The Japanese yen declined to approximately 152.3 against the US dollar on Tuesday, furthering its losses from the previous session due to increasing political uncertainty, which has affected investor confidence. On Friday, the Komeito party announced its exit from the ruling coalition with the Liberal Democratic Party, raising concerns over Sanae Takaichi’s policy plans and complicating her path to becoming prime minister. In parallel, Finance Minister Katsunobu Kato highlighted a shift in Japan’s economic context, distinguishing it from the Abenomics period of expansive policy. He pointed out that inflation has now overtaken deflation as the primary concern. Additionally, Kato cautioned against unilateral and rapid currency fluctuations, asserting that exchange rates should align with underlying economic fundamentals. The yen also faced downward pressure from a strengthening dollar, influenced by improving US-China trade relations, with a meeting between Presidents Donald Trump and Xi Jinping anticipated later this month.