The Japanese yen hovered around 155.7 per dollar on Tuesday, holding on to gains of nearly 1% from the previous session. The currency was supported by renewed verbal intervention from Tokyo following Prime Minister Sanae Takaichi’s landslide victory in Sunday’s general election. Markets are also giving Takaichi some benefit of the doubt, as she has pledged that her stimulus measures will not put additional strain on the country’s public finances.
The ruling coalition secured a two-thirds supermajority in the lower house, giving Takaichi a strong mandate to pursue higher spending and tax cuts. On Monday, she reiterated her commitment to suspending the 8% sales tax on food for two years. The yen also drew support from capital inflows as Japanese equities rallied to fresh record highs after the election, even as domestic bonds came under pressure amid mounting concerns over Japan’s fiscal outlook.
