JPY: Japan election risk impacts yen – MUFG

FXStreet Insights Team FXStreet

Lee Hardman, Senior Currency Analyst at MUFG, notes the impact of Japan's election risk on the Japanese Yen. The USD/JPY has risen above the 157.00-level, driven by expectations that the ruling coalition will strengthen its majority. This has led to renewed selling of the Yen, while a recent JGB auction showed stronger demand. Hardman notes that the political landscape is likely to support further selling of the Yen and JGBs.

Impact of Japan's election on currency

"Renewed yen selling was reinforced yesterday by the release of another opinion poll from Japan indicating that the ruling coalition government is well on course to strengthen their majority in the Lower House."

"The survey results have reinforced market expectations that Prime Minister Takaichi will win a strong mandate to continue implementing her 'reflationist' policy agenda providing a fresh catalyst for popular Takaichi trades encouraging further selling of the yen and JGBs."

"However, there was some good news for JGBs overnight. The latest 30-year JGB auction drew stronger demand."

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

(This story was corrected on February 5 at 20:40 GMT to correct a mispelling in Prime Minister Sanae Takaichi's surname.)

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.

GBP/USD drops to multi-week lows below 1.3300

GBP/USD sets aside Friday’s uptick and breaches below the 1.3300 yardstcik on Monday to hit new multi-week troughs. Falling crude oil prices following a pause in the Middle East conflict in combination with the recent soft reading in UK inflation appear to play against any BoE tightening ahead of the bank’s event later in the week.

EUR/USD advances marginally around 1.1380

EUR/USD loses bullish momentum and slips back below the 1.1400 region at the beginning of the week. Hopes of a de-escalation in the Middle East appears to lend support to the pair, although uncertainty persists over whether the US and Iran can reach a lasting solution.

Gold struggles to extend gains beyond $4,100

Spot Gold gapped higher at the beginning of the new week, as a pause in Middle East hostilities underpinned the mood and weighed on the US Dollar (USD). The XAU/USD pair traded as high as $4,116.20 during Asian trading hours, following a pause in strikes between Iran and the United States (US).

Bitcoin holds above key support amid ETF inflows, US-Iran bombing pause

Bitcoin (BTC) holds above the key 200-week Simple Moving Average (SMA) around $63,500, having posted four consecutive weeks of gains. Institutional demand shows mild signs of improvement with spot Exchange Traded Funds (ETFs) posting inflows for a third consecutive week.

Bitcoin options traders are dropping their hedges going into the Fed meeting

Bitcoin's options market has turned notably less defensive over the past month, unwinding the downside protection traders built up in June just as the Federal Reserve prepares to meet.

US Dollar mid-year outlook: Exceptional currency, exceptional risks?

The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.