USD/JPY now back up to 106.65 as Aso says he has «no intention to resign»
It’s been a topsy turvy day for the pair, and one dominated by Japanese politics — something which you’d rarely hear in the market.
Things started off earlier in the day with opposition parties calling Japanese finance minister Taro Aso to resign following the land sale documents scandal involving prime minister Shinzo Abe.
That was a negative for stocks and the Nikkei slipped a little, so did USD/JPY. And when the Ministry of Finance came out with their own confirmations on the matter and announcing that Aso is to hold a press conference — it seemed very much like one where he would step down.
USD/JPY headed lower and so did the Nikkei as well. But as Aso commented he has «no intentions» to step down from his post, the market built a relief rally from there.
As I mentioned earlier, Aso is one of the key figures in the push for Abenomics — and his efforts in managing the teamwork between the Ministry of Finance and the Bank of Japan is one that the country sees as a positive. If he was to have resigned, it would have cast further doubt on the likelihood of Abenomics achieving its goal — more so than it already is right now.
But either way, political instability is a negative point for stocks as well and is risk-off. Adding to the fact that Aso has been a prominent voice for a weaker yen, him staying on is a boost for equities and would mean that we will still be hearing more of the same «we want a weaker yen» rhetoric. Now, if only they’d actually have the guts to do something about that.