Takaichi Just Blinked

Fiscal first, monetary later for Japan.

A month ago, we outlined the next path for the Japanese Yen in The Yen's Second Act, noting that even though short-term strength could be seen, the policy push from PM Takaichi would act to weaken the Yen in the medium term.

This is already playing out, with USD/JPY moving back higher in recent days and a sharp bid seen on Tuesday following Takaichi's comments on domestic interest rates. This represents the next clear sign validating our view that she will pursue not only expansionary fiscal policy (and refuse to have it watered down), but also lend her voice to monetary policy.

We therefore take today's news in our stride and outline the steps that should push USD/JPY to fresh highs and cause a repricing in the December ‘26 TONA contract, in the coming months.