Prime Minister Ishiba vows to stay despite coalition loss
The Japanese yen climbed sharply on Monday after Prime Minister Shigeru Ishiba pledged to remain in office, despite his coalition losing its majority in Sunday’s upper house elections. While the outcome was widely expected and already priced in by markets, the result nonetheless introduced fresh political uncertainty.
With Japanese markets closed for a national holiday, the yen served as the primary gauge of investor reaction. The currency rose 1% to 147.315 per dollar, edging away from last week’s low of 149.19. It also gained 0.4% against both the euro and sterling. Ishiba’s Liberal Democratic Party secured only 47 seats, falling short of the 50 needed for a majority. He has refused to resign, even as internal and opposition pressures grow.
Tariff concerns grow as August deadline nears
Investors remain cautious as U.S. President Donald Trump’s August 1 deadline for imposing new tariffs looms. Trump recently threatened a 30% tariff on goods from Mexico and the European Union, with other countries like Canada, Brazil, and Japan also receiving letters indicating potential hikes ranging from 20% to 50%.
U.S. Commerce Secretary Howard Lutnick expressed optimism over reaching a deal with the EU, but reiterated that tariffs would commence as scheduled if no agreement is reached. Meanwhile, EU diplomats are preparing possible counter-measures in case talks fail.
Dollar dips as Fed scrutiny and yield declines weigh
The dollar slipped against most major currencies, tracking a drop in U.S. Treasury yields. The dollar index fell 0.5% to 97.87. Market strategist Marc Chandler noted that lower interest rates are putting pressure on the greenback. The 10-year U.S. yield dropped over six basis points.
Traders are now fully pricing in at least one rate cut by the Federal Reserve by October, though the possibility of a second cut remains uncertain. Tensions between Trump and Fed Chair Jerome Powell have added to market volatility, as Trump continues to pressure the central bank to ease monetary policy.
Global currency moves and bitcoin retreat
The euro climbed 0.4% to $1.1681, while the British pound rose 0.6% to $1.3488. The euro/yen rate slipped 0.4% to 172.25. Other notable moves included a 0.3% decline in the dollar against the Canadian dollar and a 0.63% drop against the Swedish krona. Bitcoin also fell over 1% to $116,788, as investors locked in profits following gains driven by the GENIUS Act’s approval.
Swiss franc and Aussie dollar strengthened against the U.S. dollar, while euro crosses with Nordic currencies saw modest changes. The euro/Swiss rate rose 0.14% and euro/Norway increased 0.55%.