Japanese Yen Tumbles as Nikkei Rises to All-Time High After Sanae Takaichi's Party Election Success; Gold Nears $4,000 Mark

Market Reactions to Japan's Leadership Election

Foreign exchange experts from prominent financial institutions have reportedly closed their strategies to hold a long position on the yen following the country’s leading political group selected Sanae Takaichi as its leader.

In commentary titled “Exiting the yen,” one chief of FX research stated:

Our strategy was bullish on the yen in our FX Blueprint but are now getting out due to the party leadership vote. Sanae Takaichi’s surprise victory creates renewed unpredictability concerning Japan’s policy priorities and the expected date of interest rate increases by the Bank of Japan.

Experts agree that inflation is a problem for Japan, but doubts are resurfacing on how it will be dealt with.

The strategist additionally noted indicators of government influence across Japan (where the government controls the BoJ’s moves) pose a potential danger.

Gold Approaches the $4,000 Mark

Bullion values are achieving fresh record highs, today, in its strongest year in over four decades.

The spot price of the precious metal has jumped by 1% or more this morning reaching $3,944/oz, approaching the $4000/oz mark.

This means the gold price has increased by 50% from the beginning of the year, likely to achieve its top annual returns since the Iranian Revolution.

Gold has been driven higher in recent months due to multiple reasons, including increasing fears that government debts are unsustainable.

The new leader’s success in the Japanese election will only have reinforced apprehensions that government officials could seek to stimulate the economy via increased debt and lower interest rates, and rely on inflation to diminish the worth of the resulting debt.

Market Overview

Japan’s stock market has jumped to a record high today, while the yen is plunging, after the top position of the country’s ruling party was surprisingly won by fiscal dove Sanae Takaichi.

Predictions that Takaichi will be a PM favoring economic stimulus has sparked a wave of enthusiastic buying driving the Nikkei 225 share index higher by five percent, rising by 2315 points to close at just over 48,000.

However, the currency is very much moving downward – it’s down about 2 percent against the US dollar to 150.3 yen per dollar.

Sanae Takaichi, who is expected to become the nation’s initial woman PM later this month, has long admired of Thatcher. However, while she holds conservative views in social matters, she follows a contrasting path in economic policy, and supports a revival of government spending and easy money policies.

As such, markets predict to maintain the country’s drive to stimulate its economy through public investment and lower interest rates, which would lead to higher inflation and greater borrowing.

As a result yen depreciation, as investors anticipate fewer interest rates hikes by Japanese authorities than before.

Japan’s government bond values are also down today, driving higher the interest rate on its 30-year debt close to peak levels, on expectations of higher borrowing and more persistent inflation.

The markets are evaluating to what extent the new leader’s proposals will mirror the “Abenomics” programme advocated by previous leader Abe.

A market expert noted:

Different from previous comments, she has not engaged from highlighting Abenomics during the party election, but many are aware her underlying stance and her support of Shinzo Abe’s three-pillar strategy.

Markets could then push to gain understanding on her policies, and how much impact she may be in shaping the BoJ’s policy thinking, ahead of the BoJ’s next meeting is seen as a potential turning point with a quarter-point increase considered likely...

Economic Calendar

• 8.30am BST: European construction data for the previous month
• 9.30am BST: British construction figures for September
• 6.30pm BST: Central bank head Andrew Bailey to deliver address at a financial forum 2025