This week, among the main G8 currencies, the Japanese yen has climbed to become the best performer with its greatest weekly gain in over a year. USD/JPY sharp decrease to the 152.73–152.90 range resulted from this strong rally; EUR/JPY dropped to new lows near 180.81 before regaining support and gently rebounding to about 181.58. The yen's strong general strength represents a clear change in market mood after last weekend's critical electoral result.
Prime Minister Sanae Takaichi's Liberal Democratic Party won an overwhelming landslide victory, therefore ensuring a supermajority that offers rare political stability and obvious possibilities for pro-growth policies. Markets have mostly embraced the result, moving beyond initial concerns about possibly aggressive fiscal growth—tax cuts, for instance—and instead concentrating on the positive implications: rejuvenated confidence attracting significant foreign inflows into Japanese stocks and bonds, therefore supporting yen demand.
Several reinforcing elements are increasing the yen's momentum. Expectations of additional Bank of Japan rate hikes—maybe three in 2026—continue to reduce negative real interest rates and counteract earlier yen weakness, while repeated verbal interventions from Tokyo officials strengthen the upward movement. Meanwhile, the larger US dollar has begun a consolidation period following recent US jobs statistics, hence letting the yen stand out as a preferred alternative in world portfolios. Since the election on February 13, the yen has risen by more than 2% versus the dollar; consistent daily increases highlight persistent bullish momentum.
