The Japanese yen weakened to a two-month low against the U.S. dollar on Tuesday as investors focused on fiscal dove Sanae Takaichi’s expected cabinet lineup following her victory in the ruling Liberal Democratic Party (LDP) leadership race. Market watchers anticipate a more expansionary economic approach under Takaichi, pushing domestic bond yields higher and testing demand in the upcoming debt auction.
The yen slipped 0.2% to 150.59 per dollar, briefly touching 150.62 — its weakest level since August 1 — while falling to a record 176.35 per euro. Analysts say Japanese officials may soon intervene verbally to prevent further currency weakness as it breaches the psychologically critical 150 threshold. “It’s a very important level, psychologically and economically,” said Bart Wakabayashi, Tokyo Branch Manager at State Street. “The Bank of Japan and Ministry of Finance likely prefer a stronger yen, so comments may begin emerging soon.”
Takaichi, seen as the most dovish of five contenders to replace outgoing Prime Minister Shigeru Ishiba, is expected to prioritize fiscal stimulus. Her stance contrasts sharply with Ishiba’s hawkish policies, prompting speculation that government spending and debt issuance could rise. The yield on 30-year Japanese government bonds climbed to an all-time high amid expectations of broader fiscal measures.
Meanwhile, the euro struggled following the resignation of France’s new Prime Minister Sebastien Lecornu and his cabinet, as European Central Bank officials signaled that rate cuts might be needed if inflation risks continue to fade. The dollar index inched up 0.05% to 98.17, with the euro steady at $1.1705.
U.S. markets remain on edge as the government shutdown delays key economic data, including last week’s jobs report. Traders now await comments from Federal Reserve officials and the release of September FOMC meeting minutes, with expectations of a 25-basis-point rate cut at the Fed’s October 28–29 meeting.


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