Japanese Yen Weakens, Long Bonds Fall After PM Ishiba Resignation

Japanese markets are poised for volatility following Prime Minister Shigeru Ishiba's announcement of his resignation after a poor election showing, raising concerns about Japan's fiscal and monetary policy direction. The yen weakened sharply against the US dollar and other major currencies, falling as much as 0.7%, while long-maturity Japanese government bonds are expected to be vulnerable to selling pressure due to heightened fiscal concerns. Investors are cautious amid uncertainty over Ishiba's successor, with potential candidates like Sanae Takaichi advocating for looser fiscal stimulus and a more cautious stance on Bank of Japan interest rate hikes. This political uncertainty has also led to increased volatility in equities and bonds, as markets await clarity on the new leadership. Meanwhile, the US dollar is recovering some losses following a weaker-than-expected US jobs report, which has increased expectations of a Federal Reserve rate cut this month. Overall, the combination of Japan's political transition and global economic signals is contributing to market instability and cautious investor sentiment.