The USD/JPY pair is trading near 147.50 ahead of Japan’s ruling Liberal Democratic Party (LDP) leadership election this Saturday, according to FX analysts Frances Cheung and Christopher Wong at OCBC.
LDP Leadership Vote in Focus
This weekend’s LDP vote is a full-format election, meaning all 295 LDP lawmakers will cast ballots, alongside an equal number of votes representing the party’s 1.1 million rank-and-file members. If no candidate secures an outright majority in the first round, a runoff between the top two contenders will be held the same day.
Public polls indicate a tight race between Sanae Takaichi and Shinjiro Koizumi, but internal LDP support appears more fragmented:
- Koizumi is backed by over 80 lawmakers
- Hayashi (Chief Cabinet Secretary) has about 60
- Takaichi is supported by around 40 members
Takaichi has been vocal against the Bank of Japan (BoJ) hiking rates, advocates stimulus measures, and has called for a review of the U.S.-Japan trade deal, particularly the $550 billion Japanese investment fund.
Koizumi, known for his role in agricultural reform and dubbed “the Rice Man” for his efforts in lowering rice prices, supports coordinated BoJ-government efforts to ensure stable prices and steady growth.
Monetary Policy Outlook and BoJ Expectations
OCBC notes that the Japanese Yen’s weakness may start to reverse once political uncertainty fades and markets refocus on the BoJ’s path to policy normalization. Rising wage growth, broader services inflation, and improving economic momentum are expected to support the central bank’s shift away from ultra-loose policy.
The next BoJ meeting is on October 30, followed by another in December. Markets are increasingly pricing in a possible rate hike at the December meeting.
BoJ Governor Ueda’s Comments Fuel Morning Upside
USD/JPY edged higher in the Asian session following remarks from BoJ Governor Kazuo Ueda, who reiterated that:
- Policy rates will rise if the BoJ’s economic outlook is met
- It’s important to monitor global conditions and tariffs
- The wage-inflation cycle is expected to hold, and price increases may persist longer than expected
Technical Outlook: 2-Way Risks Persist
- Daily momentum is mildly bearish, but the RSI is rising, pointing to mixed signals.
- Key resistance:
- 147.80 – 21- and 50-day moving averages
- 148.20/30 – 200-day moving average and 23.6% Fibonacci retracement (April low to July high)
- Support levels:
- 146.50/70 – 100-day moving average, 38.2% Fibonacci retracement
- 145.40 – 50% Fibonacci retracement
With political uncertainty and diverging policy expectations, two-way trade remains likely in the near term.