Japanese yen slides as political drama continues

The yen fell significantly on Wednesday. In the European session, USD/JPY is trading at 144.82, up 0.89% at the time of writing.

New finance minister unsettles the markets

In Japan, the dust has not yet settled on the political drama. On Tuesday, new Prime Minister Shigeru Ishiba appointed Katsunobu Kato as finance minister. Kato is a supporter of “Abenomics,” which advocates easing monetary policy. This could complicate the BoJ’s plans to tighten monetary policy, and the yen responded with sharp losses today.

Ishiba is known to support more restrictive policies, but he may have chosen Kato to allay concerns that Ishiba will make a significant change in monetary policy with a snap election on October 27. The election will be followed by the BoJ’s next meeting on October 31. The BoJ expected to maintain its policy stance.
Manufacturing PMIs continue to contract in Japan and the US

Production continues to stagnate in both the USA and Japan. Japan’s manufacturing purchasing managers’ index fell to a revised 49.7 in September, down from 49.8 in August and up above the market estimate of 49.6. This was the third straight month that factory activity fell, with a sharp decline in export orders. Business confidence has fallen to its lowest level since December 2022 as manufacturers see no light at the end of the tunnel for the battered manufacturing sector.

In the US, the ISM manufacturing purchasing managers’ index was unchanged at 47.2 in September, below the market estimate of 47.5. The decline in manufacturing continued for six consecutive months. New orders fell in September, demand remains weak and manufacturers face uncertainty over Federal Reserve monetary policy and the upcoming U.S. election.

USD/JPY Technical

• USD/JPY broke resistance at 143.69 and 144.41. Above there is resistance at 145.25
• There is support at 142.85 and 142.13