Japanese Yen Hits Two-Month Low Amid Takaichi's Expected Expansionary Policies

The Japanese yen weakened to its lowest level in two months against the dollar and reached an all-time low against the euro following the victory of fiscal dove Sanae Takaichi in the Liberal Democratic Party leadership race. Takaichi, expected to become Japan's first female Prime Minister, is anticipated to lead a more expansionist administration with increased fiscal spending, complicating the Bank of Japan's plans for interest rate hikes and monetary tightening. This dovish shift triggered a surge in domestic bond yields and a drop in the yen as markets anticipate delayed monetary tightening. Global markets also remain cautious with the euro fragile amid political changes in France and hints of possible ECB rate cuts, while the U.S. government shutdown continues to overshadow economic data releases. Despite the yen's weakness, Japan's Nikkei 225 reached record highs, while the U.S. dollar and stock markets in the U.S. showed strength amid the ongoing political and economic uncertainties. The overall market sentiment reflects a mix of optimism for Japan's growth strategies under Takaichi and caution due to shifting global monetary policies and geopolitical risks.