Japan enters the week riding a powerful post-election wave after equities surged to fresh record highs. Nikkei jumped above 57,000 following Prime Minister Sanae Takaichi’s historic election victory. Although the index has since retreated modestly, it is still holding on to the bulk of its gains, up nearly 4.5% on strong domestic risk appetite.
Takaichi’s win was historic in scale. Her Liberal Democratic Party captured 315 seats in the lower house, its strongest showing ever, and together with coalition partner Ishin now controls 351 seats. That gives the ruling bloc a two-thirds supermajority, allowing it to override the upper house and advance legislation with unprecedented ease.
That supermajority significantly strengthens Takaichi’s hand. It opens the door not only to aggressive fiscal measures but also to constitutional changes, while easing the path for defense spending increases amid a more challenging global environment. For equity investors, political uncertainty has collapsed, and policy execution risk has been sharply reduced.
Yen, however, has not followed equities in a straight line. USD/JPY initially jumped at the Asian open but quickly retreated. Traders remain alert to the risk of intervention should the Yen weaken too sharply, limiting follow-through on election-driven selling. This leaves currency markets in wait-and-see mode. With the election result now fully realized, the question is whether Yen selling momentum can re-emerge as focus shifts back to fiscal expansion, or whether the pair has already priced in the bulk of the political shock.
Technically, momentum is already showing signs of fatigue. USD/JPY’s 4H MACD is falling below its signal line, indicating that the rebound from 152.07 is losing steam. That move is viewed as the second leg of a broader corrective pattern from 159.44. While further gains remain possible as long as 155.51 holds, strong resistance is expected near 159.44 high. A clear break below 155.51 would argue that the third leg of the correction is already underway, reopening the path back toward the 152.07 support ahead.
