JPY: Deal and possible snap elections – Commerzbank
The Japanese yen is virtually unchanged this morning. However, this is not due to a lack of news. Rather both sides seem to be roughly balancing each other out, Commerzbank's FX analyst Volkmar Baur notes.
PM Ishiba may resign in the coming weeks
"The news of a deal with the US, which reduces the tariff from the previously threatened 25% to 15%, should actually be positive. The reduction of the sectoral tariff for the automotive industry to 15% is particularly important for Japan. Firstly, because Japan is (so far) the only country to have secured an exemption without quantitative limits. This should give it a certain advantage over the rest of the world. And secondly, because car exports still account for a high proportion of Japanese exports to the US."
"On the other hand, there are rumours this morning that Prime Minister Ishiba will now resign in the coming weeks after all. We had already feared this in the immediate aftermath of the election defeat at the weekend and identified it as a risk scenario for the JPY. However, the Prime Minister initially wanted to ensure that the negotiations with the US were brought to a conclusion and that a possible new government would not be burdened by them."
"If the rumours prove to be true, this could lead to a period of political uncertainty in Japan, as it is not certain that the LDP, which has ruled almost continuously for the last 70 years – with only two brief exceptions – will remain in power. If new elections are on the horizon, this issue is likely to dominate the coming weeks and could put sustained pressure on the Japanese yen."
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FXStreet Insights Team
FXStreet
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