Takaichi vs Katayama – OCBC

Japanese Yen (JPY) came under pressure this morning after PM Takaichi said she will put a growth strategy for the economy by next Summer. USD/JPY last seen at 154.53 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Daily momentum is mild bullish

“The government will aim to boost tax revenue without raising tax rates, boost private-public investments, etc. Delayed BOJ policy normalisation, risk of heavier fiscal burden amid rise in debt servicing costs, increase in social and defence spending and chance of early snap elections (given Takaichi’s high approval rating of 74%) are some factors that may pose downward pressure on JPY in the interim.”

“But on the same playbook, Finance Minister Katayama said ‘watching FX moves with high sense of urgency’. This helped to nurse JPY losses. Verbal intervention may only slow the JPY’s decline at times but cannot change the broader market momentum. We watch if verbal intervention steps up intensity under the new Finance Minister or eventually progress towards actual intervention, as JPY bears may exercise caution.”

“Ultimately for USD/JPY to turn lower would require a softer USD and BOJ showing more commitment to hike. Daily momentum is mild bullish while rise in RSI moderated near overbought conditions. Support at 153.30 (previous double-top), 151.60/80 (21 DMA, 61.8% fibo).”