The yen fell to a fresh 24-year low after Japan’s ruling coalition expanded its majority in Sunday’s Upper House election, with investors interpreting the result as a quasi-referendum on the country’s super-easy monetary policy.
The currency fell as much as 0.9% against the dollar, breaching the closely watched 137 level. Bank of Japan Gov. Haruhiko Kuroda reiterated Monday that he won’t hesitate to add monetary stimulus if needed to boost the stuttering economy.
A rise in Treasury yields and solid U.S. labor data on Friday has also given an additional boost to the dollar, which climbed against most of its major peers.
"The election outcome reflects public support for Prime Minister Fumio Kishida, and makes it clear that rising inflation in Japan isn’t as critical for the public as in overseas,” said Juntaro Morimoto, analyst at Sony Financial Group Inc. "It may make it easier for him to maintain current easy monetary policy during Kuroda’s term, a view that lends to yen selling on receding expectations for a policy tweak.”
With the BOJ keeping interest rates pinned to the floor even as foreign ones climb, the yen has sunk over 16% against the greenback this year. The currency is just a hair’s breadth away from its worst drawdown ever, according to data compiled by Bloomberg.
Japan’s election came two days after the assassination of former Prime Minister Shinzo Abe, who was seen as a key supporter of the BOJ.
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