has dropped to 156.73 on Monday. The Japanese yen had earlier fallen to its lowest levels in almost two weeks after a landslide victory for the ruling Liberal Democratic Party of Japan in early elections to the lower house of parliament. The coalition is led by Prime Minister Sanae Takaichi. However, demand for the yen returned shortly after.
Takaichi's coalition won 352 of 465 seats in the House of Representatives, according to NHK. At the same time, Japan's own Liberal Democratic Party won a majority of 316 seats. The vote result provided the prime minister with a clear mandate to implement an expansionary fiscal policy.
Markets viewed the result as a signal in favor of a more flexible budget line and possible tax breaks. This increased pressure on the yen and amid fears of a rising debt burden. At the same time, the results supported expectations of more favorable dynamics for the stock market.
A more conservative domestic agenda is now expected to advance, including immigration policies and stricter land ownership rules. All this adds uncertainty to the evaluation of the medium-term consequences for the economy and financial markets.
Technical analysis
On the H4 chart of USD/JPY, after a sharp decline at the end of January, a local low was formed in the 152.00-152.20 zone, from which the pair began to recover. This impulsive growth was accompanied by a move along the upper edge of the Bollinger Bands. The price is now trading below the recent highs and consolidating in the 155.80-157.70 range. Volatility has decreased and the structure remains corrective. However, the momentum weakened and the market entered a pause phase under resistance.
Chart H1 shows the development of sideways dynamics after growth, with the price hovering around the middle line of the Bollinger Bands and no new momentum forming. Selling pressure quickly canceled attempts to rise to 157.40-157.70, while support remains in the 155.50-155.80 region. The short-term trajectory appears neutral, with a balance between the correction and attempts to continue the recovery.
Conclusion
In summary, USD/JPY is experiencing a corrective pullback as the market digests the political implications of the Japanese election outcome. While the landslide initially weakened the yen on expectations of expansionary fiscal policy, a technical pause followed. The pair is now consolidating, caught between fundamental pressure from the expected rise in Japanese debt (bearish for JPY) and technical resistance.
The near-term trajectory will depend on whether this consolidation leads to a continuation of the recovery or a deeper correction, with clarity on the new government's fiscal measures acting as the next big catalyst.
By RoboForex Analysis Department
Disclaimer
Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
