USD/JPY Rises as Ishiba Softens Hawkish Stance

Investing.com – The nomination of Japan’s incoming Prime Minister Shigeru Ishiba has led to an increase in the value of the yen, although UBS remains skeptical that his appointment will significantly impact the pace of yen appreciation.

As of 05:00 ET (09:00 GMT), USD/JPY was up by 0.1% at ¥143.81, having previously dropped to ¥142.09 on Friday following Ishiba’s narrow victory in the leadership contest for the ruling Liberal Democratic Party.

Ishiba, a former defense minister, has been critical of previous monetary stimulus efforts. Many market participants had anticipated a victory for hardline nationalist Sanae Takaichi, who opposes additional interest rate hikes.

However, UBS analysts noted that Ishiba has moderated his previously hawkish stance in recent weeks. He indicated over the weekend that “monetary policy must remain accommodative,” aligning with the dovish outlook expressed by Bank of Japan Governor Ueda during the September policy meeting. Ueda suggested that the central bank would avoid further rate hikes amidst market instability and noted that recent yen strength has lessened the inflationary pressures.

In light of these developments, UBS believes that the political changes in Japan support a gradual path for yen appreciation rather than an accelerated one. In the coming weeks, further clarity on the policy direction of Ishiba’s administration is expected, particularly with the announcement of new Cabinet members.

UBS also shared its forecasts for USD/JPY, predicting values of ¥147, ¥143, ¥140, and ¥138 through the third quarter of 2025. They recommend selling USD/JPY on rallies toward the ¥145-¥147 range in anticipation of a longer-term decline.