• The Yen strengthens broadly after Japan’s ruling party secures a strong election victory.
• Expansionary fiscal plans keep inflation and Bank of Japan policy expectations in focus.
• The US Dollar stays under pressure ahead of this week’s delayed US jobs and inflation data.

The Japanese Yen (JPY) attracts fresh buying against the US Dollar (USD) on Monday, with USD/JPY snapping a six-day winning streak as broad-based selling pressure weighs on the Greenback and the Yen remains firmly bid across the board following Japan’s election outcome. At the time of writing, USD/JPY is trading around 155.92, down nearly 0.75% on the day.

Japan’s Prime Minister Sanae Takaichi’s ruling Liberal Democratic Party (LDP) won 316 of the 465 seats in the lower house, giving the government a “supermajority” and the ability to override the upper chamber.

The strong result clears the path for an expansionary fiscal agenda, including plans to suspend the 8% consumption tax on food for two years and roll out targeted tax cuts and spending to support households and consumption.

Takaichi tried to calm markets by saying the government would not issue new debt to fund the food tax cut, but investors remain cautious about how the measures will ultimately be financed.

The government’s more expansionary fiscal plans could add to inflation pressure in the coming quarters. This has increased market speculation that the Bank of Japan (BoJ) may face growing pressure to raise interest rates sooner than previously expected.

Meanwhile, excessive weakness in the Yen continues to keep Japanese authorities on alert, fuelling speculation over possible currency intervention.

Japan’s Chief Cabinet Secretary Kihara said on Monday that recent moves in the Yen have been “somewhat rapid and one-sided,” adding that the government is concerned about unilateral and excessive fluctuations in the foreign exchange market and is monitoring currency developments with a high sense of urgency.

In the United States, President Donald Trump’s aggressive trade policies and repeated attacks on the Federal Reserve’s (Fed) independence remain a drag on the US Dollar, as investors continue to trim exposure amid growing concerns over policy credibility.

Adding to the Dollar’s woes, markets continue to price in around two interest rate cuts by the Fed this year. Traders are now waiting for the delayed Nonfarm Payrolls (NFP) and Consumer Price Index (CPI) releases due this week for guidance on the timing and pace of easing.

White House Senior Adviser Kevin Hassett said earlier on Monday that “we should expect slightly lower jobs numbers,” adding that “lower jobs numbers shouldn’t trigger panic.”

Looking ahead, Fed Governor Christopher Waller, Stephen Miran and Atlanta Fed President Raphael Bostic are expected to speak later in the day, while attention will also turn to the Retail Sales report due on Tuesday.