Yen Firms Amid Japan’s Political Uncertainty and U.S. Tariff Deadline

The Japanese yen strengthened on Monday as investors reacted to political uncertainty following Japan’s ruling coalition losing its majority in the upper house. With financial markets in Japan closed for the day, the yen served as a key sentiment barometer, firming to 148.32 per dollar and edging up against the euro at 172.64.

Prime Minister Shigeru Ishiba’s Liberal Democratic Party (LDP) secured only 47 of the 50 seats needed to retain control of the 248-seat upper house, raising fears of policy paralysis. Ishiba’s position has been further weakened after also losing control of the more powerful lower house in October. Although the LDP could potentially strike a partnership with the Democratic Party for the People (DPP), the political uncertainty is weighing on markets.

The yen’s move comes ahead of an August 1 deadline for critical tariff negotiations with U.S. President Donald Trump. Analysts warn that any resignation by Ishiba could prompt foreign investors to exit Japanese equities and the yen, increasing market volatility.

Japanese government bonds (JGBs) faced a sharp selloff last week, pushing 30-year yields to record highs and weakening the yen to multi-month lows. Meanwhile, the broader currency market saw the euro steady at $1.1632 and the pound at $1.1342, while the U.S. dollar index stood at 98.352.

Elsewhere, the New Zealand dollar dipped 0.18% to $0.5951 after Q2 inflation came in below expectations, prompting speculation of a rate cut next month. Bitcoin slipped 1% to $116,939, staying below its all-time high of $123,153 reached last week.

Global investors remain focused on Trump’s escalating tariff threats, especially toward the European Union, which could further unsettle financial markets.