The Japanese yen fell in Asian trading on Wednesday against a basket of major and minor currencies, extending its losses for the fifth consecutive session against the US dollar and hitting an eight-month low. The currency remains under pressure from continued selling amid mounting concerns over Prime Minister-elect Sanae Takaichis expected economic policies.

Following her victory as leader of Japans ruling Liberal Democratic Party (LDP), Takaichi who is set to become the countrys next prime minister pledged to stimulate Japans economy through aggressive fiscal spending while criticizing the Bank of Japans recent rate hikes.

Price Overview

USD/JPY: The dollar rose 0.5% to 152.65 its highest level since February from an opening price of 151.90, after touching a low of 151.74.

On Tuesday, the yen closed down roughly 1.05% against the dollar, marking its fourth consecutive daily loss amid heightened political developments in Japan.

Sanae Takaichi

Takaichis weekend victory in the LDP leadership race making her Japans first female prime minister in modern history has sparked widespread debate among investors regarding her upcoming economic agenda.

A close ally of the late Shinzo Abe, Takaichi is known for supporting the stimulus-heavy policies that defined Abenomics. This reinforces expectations that her administration may adopt an expansionary approach favorable for Japanese equities but potentially negative for the yen, as it would likely extend the era of ultra-loose monetary policy.

She reiterated her commitment to boosting the economy through large-scale fiscal spending and repeated her criticism of the Bank of Japans decision to raise interest rates.

Interest Rate Outlook

Following Takaichis win, market pricing for a 25-basis-point rate hike at the Bank of Japans October meeting dropped from 60% to 25%.

Yen swap markets now imply a 41% chance of a rate hike by December down from 68% before the LDP leadership election.

Market Commentary

Lou Brien, strategist at DRW Trading in Chicago, said: There will be a period of adjustment as investors try to gauge how Takaichis policies will affect the currency.

Mohammed Al-Sarraff, foreign-exchange researcher at Danske Bank, noted: The Bank of Japan may hold rates steady this month as a precaution, but by December it will likely have more data and I expect another hike then.

He added: Inflation remains too high, interest rates are still too low, and the rationale for another rate increase this year persists.