The Japanese yen opened with a gap lower today after prime minister Ishiba announced his resignation over the weekend. While the writing was already on the wall for Ishiba for more than a month already, the news is still hitting at markets a little as he did take his own sweet time in staging his departure.
USD/JPY opened with a gap higher today as such but is now slowly eating back into that gap as we get things going in Europe. The pair has eased from around 148.00 earlier at the tail end of Asia trading to 147.60 currently. It looks like this will be another tick in the box for gap traders. Woof.
The thinking is that Ishiba's resignation could trigger another bout of political instability in Japan that could put off BOJ rate hike plans. But for now at least, I don't think markets should be all too worried. Japan's ruling LDP party will be finding a replacement in the coming month but they will have bigger issues to address in managing public perception towards their governing.
For now, they should be able to slap a plaster on to the leaking dam but they will have to do a lot more than that before the next general elections - which has to come no later than October 2028.
Going back to the yen, I would argue that the BOJ should be able to conduct their policy operations without much hiccups even with Ishiba resigning. So, any overblown fear should be faded somewhat. But considering how Ishiba has won back some public support recently then only having to go now, that's not the kind of thing that helps with the general perception and sentiment. But hey, at least Japanese stocks are feeling cheerful.
