Investing.com – The recent nomination of new Japanese Prime Minister Shigeru Ichib has sent the yen higher, but UBS is skeptical that his appointment will significantly change the speed of the yen’s rise.
At 05:00 EST (09:00 GMT), it was trading 0.1% higher at 143.81 yen, after falling to 142.09 yen on Friday after Ishiba narrowly won the leadership contest for the country’s ruling Liberal Democratic Party.
Ishiba, a former defense minister, is a critic of previous monetary stimulus, and markets were largely anticipating a win for hardline nationalist Sanae Takaishi, a staunch opponent of further rate hikes.
However, Ishiba has softened his hawkish bias in recent weeks, UBS analysts said in a note dated September 30, including his comments to local media over the weekend that “monetary policy should remain accommodative.”
Ishiba’s comments now align with BOJ Governor Ueda’s dovish comments at a policy meeting in September, where he indicated the BOJ would refrain from raising interest rates further if the market remained unstable and added that a stronger yen had reduced upside risks to inflation.
“In this context, we believe that recent political developments in Japan continue to justify a more gradual path for the Japanese yen to appreciate, rather than an accelerated one,” UBS added.
Over the coming weeks, we will gain more clarity on the policy directions of the incoming Ishiba administration, especially regarding the composition of the new cabinet members.
“Our Q3 end-quarter forecasts for USD/JPY are currently 147 yen, 143 yen, 140 yen and 138 yen through Q3 2025, and we reiterate our preference to sell USD/JPY on rallies towards the 145-147 yen range for longer trading- “Duration reduction,” UBS added.