USDJPY forecast - Impact of Abe's resignation on the Yen
The Japanese Yen (JPY) is one of the most traded Asian currencies in the financial markets. And its pair with the US Dollar – USDJPY, forms one of the four major currency pairs, which are some of the most traded currency pairs in Forex.
Since December 2016, the USDJPY has been on a bearish trend implying the Japanese Yen has been bullish. And that trend played well into the current economic crisis around the world due to the COVID-19 pandemic.
The US dollar has had the hardest blow following the effect of the pandemic in the US, which has greatly affected businesses there.
On August 27, 2020, U.S. Federal Reserve Chairman Jerome Powell, unveiled Fed’s tactic to the current inflation. However, the speech hinted that the current low rates will continue for a longer period. Following Powell’s speech, the USD index used to track US Dollar greenback against other currencies registered a drop of about 0.09%.
As the strength of the US Dollar continues to drop, the Japanese Yen, on the other hand, seems to be gaining ground.
Shinzo Abe’s Resignation
Following the announcement that the current Japanese Prime Minister, Shinzo Abe, will be stepping down, there was scepticism of how the Japanese Yen will behave in the market with some fearing that there could be a shift in policy in Japan.
However, since the ruling Liberal Democratic Party in Japan still holds power, experts do not see a significant shift in Policy. The party is to elect its leader on September 14, 2020.
The biggest threat to Japan’s policy continuity
Shigeru Ishiba, who is the former Japanese Defense minister is seen as the biggest threat to the Japanese policy community. If elected, there could be ramifying policy changes, which would affect the Japanese Yen standing in the international market.
Ishiba currently seems to command a huge following in the public opinion though he lacks the Liberal Democratic Party’s support.
Best bet according to analysts
Yoshihide Suga who was the chief cabinet secretary under Shinzo Abe announced that we will be running for the prime minister’s post two days after Abe’s announcement that he would be resigning.
Suga has good support of the Liberal Democratic Party and is expected to continue with Abe’s policies if elected to become the next prime minister.
One of the main things that analysts look forward to is the fiscal and monetary stimulus programs that were rolled out during Abe’s tenure. It would be advantageous to the Japanese Yen if the next prime minister expanded these stimulus programs.
USDJPY – what to expect towards and after the Japan PM elections
At the moment, the USDJPY is expected to continue with its bearish trend mainly due to the weakening of the US Dollar and the Fed’s accommodative shift in how he Central bank responds to the inflation that was outlined in their recent report made through Powell’s speech.
If Suga wins to become the next Japanese prime minister in September, we could see a more determined JPY; meaning a stronger bearish trend for the USDJPY.