USD/JPY: Samurai Plummets as Noda Pushes Through a General Election

Yesterday’s reports about the dissolving the Japanese government’s Lower House led the Yen to plunge by 91 pips against the American dollar. Prime Minister Yoshihiko Noda’s move to break up the Lower House amid constant pressure from the opposition and from Democratic Party of Japan members, who wanted him to step down, is perceived to wane the Samurai further.

Analysts say that the DPJ is running a huge risk of being booted from office three years after wresting power from the Liberal Democratic Party in the December 16 general election, which pundits predict the LDP will win. The Prime Minister was forced to make a last-ditch effort to break the deadlock in the Diet where his gamble is unlikely to work in the ruling party’s favor. Noda’s high interest in gaining a reputation as a great politician rather than doing what’s best for his party sees an unenthusiastic not for investor confidence toward the Japanese economy.

Meanwhile, Federal Reserve Chairman Ben S. Bernanke presses on actions to speed growth and rebound the housing market from the obstacles it faces, ranging from too- tight lending rules to racial discrimination. The government will continue to use the policy tools that they have to help support economic recovery. Thus, the US’ revival of their housing industry awaits the crush of the Japanese yen. A buy position is recommended for the USD/JPY in today’s impending exchanges.

Aviv N. Shapiro is a Senior Research Analyst and Business Development Officer for AlgosysFx.