New Leadership, Old Playbook
The new PM's victory speech laid it out plainly: "bold fiscal action" to kickstart growth, with a supplemental budget rumored north of ¥20 trillion.
Markets read between the lines instantly — this means delayed or abandoned BOJ normalization. Rate hikes? Maybe one token move in 2026, if we're lucky.
Japan's structural issues haven't vanished: aging population, high public debt, export reliance in a tariff-heavy world. The easy answer is always print-and-spend. The yen takes the hit.
Carry Trade Rebuilding
Carry traders are piling back in — funding in low-yielding yen to buy higher-yielding dollar assets — rebuilding positions that unwound violently last year.
Contrast Japan with the U.S.: inflation still sticky (real-world costs screaming higher), Fed firmly on hold, tariffs reinforcing dollar exceptionalism.
Yield differentials are widening again, and capital flows follow. The setup is textbook dollar-bullish.
Technical Picture: Clean Breakout
The chart couldn't look cleaner. After consolidating for months below 158 resistance, the election catalyst delivered a weekly close well above — volume surging, momentum resetting bullish.
Next targets: 162 (2022 highs extension), 165–170 longer-term if stimulus details exceed expectations.
Support: 155–156 — former resistance turned floor. Risk/reward skews heavily favorable.
Bottom Line
The new Japanese Prime Minister's stimulus pivot is the gift that keeps giving for yen bears. Easier fiscal policy, delayed BOJ tightening, and rebuilding carry flows point to sustained weakness.
USD/JPY has clear air toward 165+ into year-end and beyond. We're aggressively long — one of our highest-conviction forex trades right now. Size it accordingly; the trend is your friend here.