USDJPY has risen 3.57% since Takaichi won the leadership of Japan’s ruling party, more than double the gain of the dollar index. Takaichi, a fiscal dove who has since secured the prime minister position, plans to ease inflation pressures on households, which likely means higher government spending. This has supported USDJPY throughout October, but the rally driven by her victory may soon lose strength. 

Takaichi, Japan’s first female prime minister, appointed Katayama Satsuki as the country’s first female finance minister. Katayama favors a stronger yen and sees USDJPY within the 120–130 range. Her appointment suggests Takaichi may want to strengthen the yen to contain inflation. However, Takaichi has also criticized the Bank of Japan for its rate hikes before and continues to support looser fiscal and monetary policies. 

(US – Japan 2 Year Yield Difference vs USDJPY) 

The BOJ has paused hiking for now but is likely to raise rates further in the future. Combined with expectations of fiscal expansion, Japanese bond yields may climb in the coming months. Faster quantitative tightening from the BOJ could also add upward pressure on yields. This could ultimately support the yen, as higher domestic yields may encourage a reversal of carry trades and increase demand for the currency. 

USDJPY typically shows a strong positive correlation with the yield spread between US and Japanese bonds. When the two diverge, USDJPY often realigns itself with bond market trends, as seen in both 2024 and 2025. A similar adjustment could occur in the coming weeks. 

USDJPY 

Technically, USDJPY has formed a multi-year triangle formation and is currently testing the upper boundary, supported by the so-called “Takaichi trade.” If no breakout occurs soon and resistance holds, the pair may begin to move toward the lower trendline. A downside breakout in 2026 is possible if the US dollar continues to lose its high-yield advantage.