• The Euro rises against the Japanese Yen, supported by the latter’s persistent weakness.
• The election of Sanae Takaichi, seen as a pro-stimulus and dovish leader, weighs on the Japanese Yen.
• France’s political crisis limits the Euro’s upside potential.

EUR/JPY gains 0.30% for the day on Tuesday, trading near a new record high of 176.60. The pair maintains strong bullish momentum, supported by the Japanese Yen’s (JPY) weakness following the political repercussions of Sanae Takaichi’s victory in Japan’s ruling Liberal Democratic Party leadership race, securing her position as the country’s next Prime Minister.

Investors perceive Takaichi as a leader favoring expansionary fiscal and monetary policies. Her election has revived expectations of fiscal stimulus and the maintenance of loose monetary conditions, reducing the likelihood of an interest rate hike by the Bank of Japan (BoJ) at its October 29-30 meeting. This outlook continues to weigh heavily on the JPY.

In Europe, the Euro (EUR) remains under pressure after the surprise resignation of French Prime Minister Sébastien Lecornu, announced just hours after he unveiled his new cabinet. This resignation, the fifth in less than two years, has reignited concerns about France’s political stability and, by extension, that of the Eurozone. Analysts at Scotiabank note that “Euro area government bond spreads have widened again, reflecting renewed concerns about fiscal fragmentation.”

Despite these political headwinds, the interest rate differential between the Eurozone and Japan continues to support the EUR/JPY pair.