The USD/JPY pair has tumbled to a five-month low.
On Thursday, the Japanese yen is surging against the US dollar, with the current USD/JPY exchange rate at 141.62.
A political scandal is unfolding in Japan, amplifying market expectations for a swift revision in monetary policy and offering an accessible exit from the present quantitative easing format. This potential move could ease the transition away from the ultra-soft interest rate phase.
The focal point is the disintegration of the Abe Fraction, the once-dominant ruling political party previously led by ex-Prime Minister Shinzo Abe. The current Prime Minister, Fumio Kishida, recently announced cabinet changes in response to a fundraising scandal, aiming to avert its repercussions. This reshuffle might result in the removal of influential figures who historically influenced the Bank of Japan.
Legally, the BoJ is independent of governmental influence when determining credit and monetary policy. However, political pressures have been historically present and influential.
These unfolding events deserve close attention. Currently, the situation seems to be tilting toward cabinet changes, which could have a positive impact on the JPY.