USD/JPY jumps above 153.50 amid uncertainty over BoJ rate hike prospects

• USD/JPY surges above 153.50 amid uncertainty over scope for further BoJ policy-tightening
• Japan’s growth outlook appears to be weak as Shigeru Ishiba fails to form a majority government.
• Trump’s victory has dampened Japan’s export sector outlook.

The USD/JPY climbs above 153.50 in European trading hours on Monday. The asset strengthens as the Japanese Yen (JPY) has weakened across the board amid growing uncertainty over when the Bank of Japan (BoJ) will hike interest rates again.

The BoJ Summary of Opinions (SOP) for the October policy meeting showed that officials were divided over the timeframe for further policy tightening. Market experts believe that political uncertainty and likely consequences of Republican Donald Trump’s victory in the United States (US) presidential elections on Japan’s economic outlook have limited the scope for BoJ to deliver more rate hikes.

Liberal Democratic Party (LDP) leader Shigeru Ishiba is elected as prime minister again on Monday but has to lead with a minority government, given that its part lost its lower house majority held since 2012, a scenario that is unfavorable for smooth implementation of government policies.

Meanwhile, Trump’s landslide victory in the US, who is expected to take both the Senate and the House of Representatives is expected to weigh on Japan’s export sector. Trump vowed to raise import tariffs by 10% universally, which will weaken the scale of exports from Japan, being one of the leading trading partners to the US.

Trump’s victory has kept the US Dollar (USD) on the front foot. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, inches closer to a four-month high of 105.45.

This week, investors will focus on the US Consumer Price Index (CPI) data for October, which will be published on Wednesday. Economists expect the annual headline inflation to have accelerated to 2.6% from 2.4% in September, with core figures growing steadily by 3.3%.