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TAKAICHI DOES NOT CARE FOR JPY

ADMIN || 27th October 2025

The early risk-positive vibes in Asia on Monday are leaving the yen as a laggard and it’s not just about hopes for a comprehensive trade deal between the US and China. FX traders are also pricing in Sanae Takaichi’s failure to provide verbal support for the curreny. In her first address to Japan’s parliament as prime minister, the yen was left out although many topics were covered, which will likely weigh on JPY.

While there will be a pain threshold at some stage, Takaichi’s silence shows it hasn’t been reached yet, which is a green light for USD/JPY to keep grinding higher. Traders will also be looking at softer Treasury futures which imply higher cash yields to support the US dollar on Monday.

Should USD/JPY climb above the October peak (153.2) FX traders will be expecting a swarm of verbal intervention from Japanese officials. But that may be ineffective until Takaichi herself voices concern that the yen has fallen too far. The next level after 153.2 is straightaway 155.35 where we expect JPY to land now before BOJ policy on 30th Oct. This is what happens when politics interferes with macros.

Even today morning JGB futures are holding early losses after PPI Services data came in at 3%, That’s well above forecasts so it offers more fuel for BOJ hawks to call for a rate hike this week. At the September BOJ meeting there were 2 members in favor of an immediate rate hike, this week it could be three votes given recent sound bites. But considering Ueda does not have a green signal from Takaichi, 30th Oct meeting market pricing is almost zero for a 25bps hike. No matter how hard Ueda tries to be hawkish in his press con, JPY will remain under pressure from both the global risk on sentiment currently post the likely US China trade deal as well as a sleeping central bank when inflation is clearly consistently well above it’s 2% target for more than 2 years now.

The only barrier to the current fall in JPY might be the current US administration view that BOJ is delayed in it’s rate hiking cycle leading to an undervalued JPY helping Japanese auto exports to US. When Trump meets Takaichi today, this topic might surely come up in their discussions. But will Takaichi start caring for JPY? Unlikely.

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