JPY LDP Landslide

The LDP's landslide victory in Japan's Lower House election paves the way for Sanae Takaichi's fiscal reforms, likely funded by FX reserves to support the Yen. Meanwhile, the ECB remains cautious but not yet alarmed by Euro strength as markets turn focus to upcoming US inflation and labor data.

Key Takeaways

• 1.The LDP-JIP coalition won a super-majority (354 seats) in Japan's Lower House elections, enabling the implementation of 'Sanaenomics' including consumption tax cuts.
• 2.Japan can fund tax cuts via the Foreign Exchange Fund Special Account (FEFSA), which acts as a form of FX intervention to support the JPY without new bond issuance.
• 3.The 160 level in USD/JPY is a critical technical and political threshold that Japan's Ministry of Finance is actively defending.

Table of Contents

• Asia overnight
• JPY: LDP landslide
• EUR: too strong for comfort?
• USD: back to US
• Open trade recommendations
• Key events
• Red Mount Analytics
• Global Markets Research contact details

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