As the U.S. election approaches, Wall Street strategists believe the outcome could have a profound impact on Japanese assets, particularly the yen. If Harris wins, she may stick to existing economic policies that support the Federal Reserve’s path to lowering interest rates, narrowing the U.S.-Japan bond yield gap, thereby strengthening the yen. However, if Trump returns to the White House, his policies of low taxes, high tariffs, and deregulation could lead to rising inflation, boosting the dollar in the short term and putting the yen at risk of significant depreciation.
Strategists believe that the Japanese market will experience significant volatility due to the election results, especially as differences between the Republican and Democratic parties in trade and fiscal policy could affect the global economy. State Street Global Advisors Senior Strategist Masahiko Loo noted that a Trump victory might initially strengthen the dollar and weaken the yen, but if he implements tariff policies, it could trigger risk-averse sentiment in the market and impact the upward trend of the Japanese stock market.
The market anticipates that Harris's victory could lead the dollar-yen exchange rate to fall to the 150 level, while a Trump win, or even a “red wave,” could push the dollar-yen rate to 155 or higher. Some analysts predict that if Trump imposes new tariffs on China, it could affect the Japanese economy, as Japanese companies rely on the Chinese market. As the election approaches, yen volatility increases, and the market is closely monitoring the impact of the election results on the Japanese market.
