The Japanese yen fell broadly across Asian markets on Monday against a basket of major and minor currencies, deepening losses for the third consecutive session versus the US dollar. It hit a two-month low, trading below 150 yen per dollar for the first time since early August, as open selling positions on the Japanese currency accelerated following Sanae Takaichis victory in Japans ruling Liberal Democratic Party (LDP) leadership race.

Takaichi is poised to become Japans first female prime minister and is widely viewed as having the most expansionary fiscal and monetary agenda among the five candidates who competed to succeed outgoing hawkish premier Shigeru Ishiba.

A vocal critic of the Bank of Japans recent efforts to normalize and tighten monetary policy after years of unprecedented easing, Takaichis rise to power is expected to delay any near-term rate hikes, as she is likely to favor a cautious, gradual approach to preserve Japans fragile economic growth.

Price Overview

USD/JPY today: The dollar rose 1.8% to 150.10 its highest level since August 1 from Fridays close of 147.46, after hitting an intraday low of 149.00.

On Friday, the yen fell 0.15% against the dollar, marking a second straight daily loss amid continued profit-taking from its two-week high of 146.59.

For the week, the yen gained 1.35% against the dollar, its first weekly advance in three weeks and the biggest since May, supported by safe-haven demand.

Takaichis Victory

Following weekend elections, Sanae Takaichi won the leadership of Japans ruling Liberal Democratic Party, becoming the first woman to hold the post since the partys founding and paving the way for her to succeed Shigeru Ishiba as the next prime minister.

Her victory followed an intense internal contest focused on strengthening Japans defense capabilities, promoting industrial innovation, and maintaining economic stability amid mounting global pressures.

Analysts view her win as a significant political shift, given her conservative stance and past criticism of the BOJs tightening plans suggesting a more cautious approach to rate hikes in the near term.

Speaking at a press conference after her victory, Takaichi said the government and central bank must work closely to achieve demand-driven inflation supported by higher wages and stronger corporate profits.

Market Overview

The yen weakened broadly in the forex market and is on track for its biggest one-day loss against the dollar since May.

Japans 30-year government bond yield climbed 13 basis points to 3.28%, just below last months record high of 3.285% reached after Ishibas resignation.

Japanese stocks rallied sharply, with the Nikkei index surpassing 47,000 points for the first time in history.

Analyst Commentary

Mahjabeen Zaman, head of FX research at ANZ in Sydney, said Takaichis victory will likely lead to some weakness in the yen.

She added: Theres a lot of near-term political and fiscal uncertainty, and the BOJ may exercise caution even as data supports a more hawkish stance.

Chris Weston, head of research at Pepperstone in Melbourne, said: Were in the eye of the storm, as traders look for clues on how aggressively Takaichi will pursue fiscal stimulus.

Weston added: If markets sense shell follow a reflationary path similar to Abes, that could keep bond buyers sidelined shell need to tread carefully if she goes down that route.

Interest Rate Outlook

Market pricing for a 25-basis-point rate hike by the Bank of Japan in October fell sharply from 45% to 10%.

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