EUR/JPY gathers strength above 173.50 on heightened political uncertainty in Japan

• EUR/JPY gains ground to around 173.55 in Friday's early European session, adding 0.43% on the day.
• Japan PM Ishiba's resignation clouds the BoJ outlook, weighing on the JPY. 
• The French PM is set to lose a confidence vote on Monday. 

The EUR/JPY cross rises to near 173.55 during the early European trading hours on Monday. The Japanese Yen (JPY) weakens against the Euro (EUR) following news that Japanese Prime Minister Shigeru Ishiba had resigned.

Japan's Ishiba announced on Sunday that he will step down as leader of the world's fourth-largest economy amid growing political discord within his party. Ishiba further stated that he would serve as Prime Minister until his replacement comes up. Concerns over political uncertainty exert some selling pressure on the JPY. 

"From October onward, however, outcomes will in part depend on the next prime minister, so the situation should remain live," Hirofumi Suzuki, chief currency strategist at SMBC. 

On the Euro front, investors will closely monitor French Prime Minister Francois Bayrou's confidence vote, which he is expected to lose. The turmoil threatens France's ability to rein in its debt, with the risk of further credit downgrades looming. Fears that the Eurozone's second-biggest economy might further fall into political uncertainty might cap the upside for the shared currency in the near term. 

"The government will fall," said Jean-Luc Melenchon, the leading figure of the hard-left France Unbowed (LFI) party, echoing similar comments from others on the left and right.