Yen Volatility Returns as Japan’s New Leadership Shakes Up FX Markets

The Japanese yen has reemerged as the most closely watched currency in global forex trading this week. Following Sanae Takaichi’s election as Japan’s new prime minister, the yen weakened sharply to ¥151.40 per dollar, reigniting talk of possible currency intervention by Tokyo.

Policy Shift Fuels Uncertainty

Markets expect Takaichi’s administration to pursue fiscal stimulus and a continuation of ultra-loose monetary policy, keeping Japanese yields near zero while global peers hold rates higher.

The result, renewed pressure on the yen and an uptick in carry trades, where investors borrow in yen to buy higher yielding currencies.

Japan’s finance minister has already warned against “excessive FX volatility,” hinting that direct market action remains possible if moves accelerate.

Ripple Effects Across FX

The yen’s slide is rippling through global markets. Traders report renewed strength in the U.S. dollar, modest gains in high-yielding Asian currencies, and stronger safe-haven demand for the Swiss franc.

With the yen near multi decade lows, any intervention by Japan’s Ministry of Finance could trigger sharp reversals across pairs like USD/JPY, AUD/JPY, and EUR/JPY.