On Monday, USD/JPY unexpectedly breached the 150 range, shocking traders with a 200-pip upward gap. The pair continues to show bullish momentum, ascending into new price territories. The last time the pair reached the 150.50 level was in early August, when traders were reacting to the outcome of the Bank of Japan's July meeting. Back then, the meeting results disappointed yen bulls: the central bank remained overly cautious and failed to signal a clear timeline for the next interest rate hike. As a result, the yen weakened, and USD/JPY hit multi-month highs, peaking at 150.92.
The rally is also indirectly linked to the BOJ's anticipated inaction. However, the catalyst behind the jump was the news that Sanae Takaichi had become the new leader of Japan's ruling Liberal Democratic Party. Her victory triggered a broad sell-off in the yen.
Interestingly, this outcome was expected to happen a year ago. In the 2024 party primaries held at the end of September, Takaichi was the front-runner, but surprisingly lost to Shigeru Ishiba, who was widely expected to finish third. Ishiba made a bold move by dissolving the lower house of parliament, seeking greater political leverage through new elections. That miscalculation was fatal — the LDP lost its majority in the lower house for the first time since returning to power in 2012. When the upper house elections were held in July this year, the ruling coalition also lost its majority there.
Such devastating political results led to Ishiba's resignation — both as LDP leader and prime minister (officially "to prevent division within the party").
Despite the prime minister's resignation, power remained within the LDP, which chose its new leader over the weekend. As noted, Sanae Takaichi emerged as the winner.
First, Takaichi's win was not guaranteed. In the second round, she received 185 votes, compared to her opponent's 156.
Second, Takaichi is well known for her firm opposition to tightening monetary policy. In her view, the BoJ raising rates would undermine Japan's fragile economic recovery. She is also seen as a protege of former Prime Minister Shinzo Abe and a proponent of his economic policies, dubbed "Abenomics," which favored aggressive fiscal and monetary stimulus.
Following her victory, the probability of a BOJ rate hike by the end of the year fell sharply — from 70% to just 35–40%. Those numbers speak volumes.
Officially, the BoJ is an independent institution. However, it's no secret that Japan's prime minister can exert political influence over the central bank. That's why the victory of a clearly dovish candidate in the party primary sent USD/JPY rocketing into the 150 range.
Still, this market reaction may have been overblown. After all, Takaichi has only won the internal party leadership for now — her official appointment requires parliamentary approval. Although it is usually a formality, the LDP no longer holds an outright majority in either house, which means Takaichi will need to rely on coalition partners or opposition support. A vote is expected mid-month. Until then, the "Takaichi factor" will remain in focus for USD/JPY traders — but it's unlikely to fuel continued strong growth, especially after a 200-pip gap up.
The yen weakened for understandable reasons: the market sees a potential return to cheap money and larger government spending. But such politically driven spikes are often followed by corrections. Prior to the parliamentary vote, the "Takaichi factor" is likely to fade gradually, allowing USD/JPY sellers to attempt a partial gap close.
Also worth noting — despite the impulsive price movement, buyers failed to break through interim resistance at 150.50 (upper line of the Bollinger Bands on the H4 chart) and even stronger resistance at 150.80 (upper boundary of the Kumo cloud, aligned with the upper Bollinger Band on the weekly chart).
If buyers fail to breach 150.50 in the short term, the bullish momentum may fizzle out. In that case, short positions will once again become favorable, with targets at 150.00 and 148.50.
