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Japan's Ishiba: Election was a harsh judgment on LDP government

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Japan's Ishiba: Election was a harsh judgment on LDP government

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update 2025.07.21 14:20
Japan's Ishiba: Election was a harsh judgment on LDP government

update 2025.07.21 14:20

Japanese Prime Minister Shigeru Ishiba on Monday apologized to the ruling Liberal Democratic Party (LDP) for the election loss, adding that he will continue to govern in coalition with Komeito.

Key quotes

Apologizes to the LDP party for election loss.

Most important thing for Japan is political stability as it faces several challenges.

Will continue to govern in coalition with Komeito.

Will strive to reach a deal with the US on tariffs while protecting national interest.

Want to speak with President Trump at the earliest date possible to seek a solution on trade.

Will seek cooperation of other parties to tackle rising prices.

Will not expand formal government coalition.

Not currently considering personnel changes.

Need to stay in office to deal with tariff talks, rising prices and economic issues.

Market reaction

At the time of writing, the USD/JPY pair is trading 0.25% lower on the day to trade at 148.44. 

Japanese Yen FAQs

The Japanese Yen (JPY) is one of the world's most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan's policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

One of the Bank of Japan's mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

Over the last decade, the BoJ's stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen's value against other currencies seen as more risky to invest in.


Date

Created

 : 2025.07.21

Update

Last updated

 : 2025.07.21

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