Citi has issued a statement addressing the possible outcomes of Japan’s Liberal Democratic Party (LDP) presidential elections and their impact on the currency pair.
The financial services company noted that it is difficult to predict the impact of the election on the exchange rate due to the crowded nature of the race.
According to Citi, the biggest risks for the USDJPY pair depend on the winner of the election. If Sanae Takaichi wins, it could be seen as negative for the Bank of Japan’s monetary policy normalization, potentially leading to a weaker Japanese yen.
Conversely, a win for Shigeru Ishiba could signal an abandonment of Abenomics-style policies, potentially strengthening the yen.
Despite the uncertainties, Citi’s outlook for the USD/JPY remains unchanged. The company expects the currency pair to fall below ¥140/$ only next year. However, there is also the possibility of a recovery to a range between ¥151/$ and ¥155/$ before then.
Citi emphasized that while risks are tilting towards a downside for the USD/JPY, they do not expect a significant deviation from their current scenario.
This outlook indicates a level of stability in the currency pair, despite the political variables at play. Citi’s analysis shows that the election outcome is being closely watched given its potential implications for currency market dynamics.
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