Translation: "Japan in Focus: Currency Changes and Stock Gains Ahead of US Elections

As the world eagerly watches the outcome of the U.S. presidential election between Kamala Harris and Donald Trump, the Japanese financial market is experiencing movement. The yen is weakening, and Japanese stocks are recording gains of more than one percent. Investors speculate that a Trump victory could prolong the yen's weakness, as his economic policy is considered expansive and inflationary. In contrast, a Harris victory could boost the yen against the dollar, as it might facilitate the Federal Reserve's ability to further lower interest rates. In the Japanese market, the focus is particularly on developments in the U.S., due to the significance and liquidity of the markets and the importance of the dollar-yen pair during Asian trading hours. The yen fell by 0.8% to 152.85 per dollar in Tokyo, showing fluctuations between gains and losses. Trump secured victories in the states of Florida, Arkansas, Alabama, Missouri, and South Carolina, while Harris won Massachusetts, New Jersey, Vermont, Illinois, and Maryland. According to Charu Chanana from Saxo Markets, early results could improve Trump's chances, but the race remains open. The greatest risk for global equity markets would be a Democratic sweep or a contested election result. The implied volatility of overnight options for the dollar-yen pair rose to 36.5%, approaching the yearly highs reached in August. The Nikkei index rose by 1.3%, while the Topix index gained 1.1%, with increases in financial and chip stocks. At the same time, Japanese 10-year government bond futures fell by five ticks, while the benchmark bond yield remained unchanged at 0.935%. Since the plunge of both indices in August, investor confidence remains subdued. The ongoing decline of the yen feeds imported inflation, increasing pressure on the Bank of Japan to raise interest rates. These developments also weigh on the Liberal Democratic Party, which must form a new coalition after losing its majority in the lower house.