JPY: Election risks and BoJ path – Commerzbank

FXStreet Insights Team FXStreet

Commerzbank’s Thu Lan Nguyen argues that Prime Minister Sanae Takaichi’s landslide victory increases market concerns over a more expansionary fiscal and monetary mix that could weaken the Japanese Yen. However, Nguyen outlines two scenarios where the Yen could eventually appreciate, either via a market backlash against rising debt or a faster Bank of Japan tightening response to inflation risks.

Takaichi win raises yen policy risks

"This means that virtually nothing stands in the way of the Takaichi government's plans as with this majority, it is now possible for it to pass laws without the approval of the upper house."

"This is because there are fears that Takaichi will pursue an overly expansionary fiscal and monetary policy."

"One danger that the market sees is that she could put an end to the Bank of Japan's cautious normalization course."

"If investors increasingly turn away from Japanese government bonds because they fear national debt will spiral out of control, the government will have to backtrack if it does not want to risk national bankruptcy."

"In order to bring inflation back under control in such a scenario, the BoJ may have to keep interest rates at a restrictive level for an extended period of time, which could make it more difficult to service the national debt."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

USD/JPY stays below 160.50 as markets assess BoJ decision

USD/JPY fluctuates in a relatively narrow range above 160.00 on Tuesday as markets assess the Bank of Japan's (BoJ) decision to raise the policy rate by 25 at the June meeting. Meanwhile, investors keep a close eye on news coming out of the Middle East, while preparing for the critical Fed meeting.

AUD/USD trades in tight channel near 0.7050 despite hawkish RBA message

AUD/USD trades modestly lower on the day at around 0.7050 on Tuesday as markets adopt a cautious stance amid a lack of details surrounding the US-Iran peace agreement. The Reserve Bank of Australia (RBA) left the door open for possible policy tightening after leaving the interest rate unchanged, as expected, at the June meeting but failed to boost the Australian Dollar.

Gold clings to moderate gains above $4,300 following Monday's rally

Gold maintains a mildly positive tone, holding gains after rallying about 6% over the last few days. The precious metal's recovery, however, has lost steam after crossing the $4,300 line as the initial enthusiasm about the US-Iran peace deal faded, with investors moving to the sidelines in anticipation of details of the agreement and monetary policy decisions by the Fed.

Solana's rebound gains momentum as ETF inflows return

Solana (SOL) steadies at $73 after posting three consecutive green candlesticks since the weekend. The recent recovery is supported by institutional demand, with spot Exchange Traded Funds recording net inflows of $2.81 million on Monday.

Kevin Warsh opens first Fed meeting June 16 with rate hold expected

Kevin Warsh was confirmed by the Senate in a 54-45 vote and sworn in as Federal Reserve Chair on 22 May 2026. The ceremony took place at the White House, with Supreme Court Justice Clarence Thomas administering the oath. The FOMC meeting on 16 and 17 June is his first as chair. The June meeting is also a quarterly projection meeting.

4.2% headline, 0.2% core: Why the Fed's next hike may be targeting the wrong problem

May's CPI put headline inflation at 4.2% on the year, up from 3.8% in April and the hottest reading since April 2023, while core prices rose just 0.2% on the month, undershooting the 0.3% consensus and halving April's pace.