Insights 
VT 
Key Takeaways
- Japanese yen briefly strengthens post-election, but MUFG warns rally may not last
- Ruling coalition loses Upper House majority; PM Ishiba vows to stay
- Political uncertainty weighs on U.S.-Japan trade progress
The Japanese yen saw a modest surge following Sunday’s Upper House election, but analysts remain sceptical of its staying power. The USD/JPY pair slipped 0.5% to 147.88 by the Monday close, briefly testing intraday lows near 147.69 on the back of political headlines.
On paper, the market welcomed the fact that Prime Minister Shigeru Ishiba will remain in power despite the ruling coalition losing its majority—but the tone is far from celebratory.
BoJ Stays Dovish in the Face of Uncertainty
The Bank of Japan, already cautious about raising rates, now has even more reason to remain dovish. Heightened political risk tends to favour policy stability over experimentation, and with the spectre of trade tension looming, the BoJ may lean on continuity rather than tightening.
This adds an undercurrent of softness to the yen’s outlook, especially as the dollar remains fundamentally supported by relatively hawkish Fed policy.
Technical Analysis
USDJPY remains under heavy selling pressure, slipping below the 148.00 mark with a sequence of lower highs and lower lows. The MACD histogram is firmly negative and expanding, while the signal and MACD lines are diverging—signalling sustained downward momentum. Price also remains decisively below the 30-MA, reinforcing the intraday bearish structure.
Picture: USDJPY struggles beneath 148.00 as momentum fades. A break below 147.69 opens the door to deeper decline, as seen on the VT Markets app
The recent move comes amid growing caution from traders following mixed comments from BoJ policymakers last week, where Governor Ueda hinted that “exit from ultra-loose policy will remain gradual.”
Meanwhile, a firmer US dollar has failed to keep USDJPY afloat, suggesting potential haven demand for the yen is resurfacing. If 147.69 breaks, eyes shift to the next psychological level at 147.50.
Trade Deal Talks Could Tip the Scale
Looking forward, all eyes remain on the trajectory of U.S.-Japan trade talks, particularly as the August deadline approaches.
Should negotiations deteriorate, the yen could regain safe-haven appeal—but in the absence of a clear shift, traders may revert to watching the dollar’s side of the equation for direction. For now, the yen’s bounce looks less like a breakout and more like a pause before another leg lower.
