The Japanese yen fell in the European market on Tuesday against a basket of major and minor currencies, deepening its losses for the fourth consecutive day against the US dollar and hitting a two-month low. The decline came amid continued open selling pressure, particularly following Sanae Takaichis victory in the Liberal Democratic Partys leadership election.

Takaichi is set to become Japans first female prime minister and is viewed as having the most expansionary fiscal and monetary agenda among the five candidates vying to succeed outgoing Prime Minister Shigeru Ishiba.

Price Overview

Yen exchange rate today: The dollar rose 0.25% against the yen to 150.70 the highest level since August 1 up from the opening price of 150.25, after recording an intraday low of 150.19.

On Monday, the yen closed about 2% lower against the dollar, marking its third consecutive daily loss and its steepest daily decline since May 12, following recent political developments in Japan.

Sanae Takaichis Victory

Sanae Takaichi won the leadership of Japans ruling Liberal Democratic Party (LDP) following weekend elections, becoming the first woman to hold the position since the partys founding paving the way for her to become Japans next prime minister, succeeding Shigeru Ishiba.

Her victory came after a competitive race within the party, where her campaign focused on strengthening Japans defense capabilities, promoting industrial innovation, and maintaining economic stability amid growing global pressures.

Takaichi has been one of the most vocal critics of the Bank of Japans plans to normalize and tighten monetary policy after years of unprecedented easing. Her premiership is therefore expected to delay any imminent rate hikes, as she is likely to favor a more cautious, gradual approach to sustain Japans fragile economic growth.

After securing the party leadership, Takaichi stated at a press conference that the government and the central bank must work closely to ensure inflation is driven by demand, supported by rising wages and corporate profits.

Japanese Interest Rates

Following these political developments, market pricing for a 25-basis-point rate hike by the Bank of Japan in October fell from 45% to 10%.

Yen swap markets on Monday indicated a 41% probability of a rate hike by December, down from 68% on Friday.

Analyst Comments

Chris Weston, head of research at Pepperstone Group in Melbourne, said: We are in the eye of the storm, noting that traders are searching for clues on how far Takaichi will go in pursuing fiscal easing.

Weston added: If markets sense that she intends to follow an Abe-style expansionary path, it could keep bond buyers away from the market. She must tread carefully if she chooses that route.