Ishiba Shock Exit Sparks Bets on Reflationary Fiscal Reset

Summary:

The yen weakened across the board on Monday as investors responded to Prime Minister Shigeru Ishiba's announcement of his resignation and the rising probability that former foreign minister Toshimitsu Motegi will succeed him. Motegi's well-documented advocacy of loose monetary policy is expected to cast doubt on the Bank of Japan(BoJ)'s trend toward policy normalization.

BUY GBPJPY

Close Time

CLOSED

199.182

Entry Price

204.140

197.800

211.082 -0.130 -0.06%

52.3

Pips

Profit

197.800

199.705

Exit Price

199.182

Entry Price

204.140

Fundamentals

During early trading, GBPJPY attempted to appreciate. However, selling interest emerged around 200.30, triggering a 0.15% pullback that pushed the cross into the mid-199.00 region.

At the start of the week Japanese equities surged. The Nikkei 225 jumped more than 800 points in the morning session and held firm, leaving the index within striking distance of an all-time high. The risk-on sentiment spilled over into FX, prompting a sharp broad-based sell-off in the yen. If the upbeat mood persists, the JPY remains vulnerable to additional downside pressure.

The catalyst was Prime Minister Shigeru Ishiba's unexpected resignation over the weekend. Ishiba stated that the timing had been “carefully considered,” noting that he had just secured the formal reduction of U.S. auto tariffs from 27.5% to 15%. “With the negotiations on U.S. tariff measures now concluded, I believe this is the appropriate moment to step down,” he told reporters. His departure brings an abrupt end to a tenure that began less than a year ago and was derailed after his ruling coalition lost its majority in the Lower House.

Nevertheless, Shigeru Ishiba’s withdrawal has opened the door to a new leader, with the hope that a fresh face can re-energize both the party and the electorate. Shinjiro Koizumi, the Minister of Agriculture, Forestry and Fisheries and son of former Prime Minister Junichiro Koizumi, is widely regarded as the front-runner; his youth and broad popularity resonate with the market. Sanae Takaichi, long viewed as close to the late Shinzo Abe, is also expected to be a formidable contender. The upcoming leadership race is likely to fuel speculation over policy continuity and to catalyze fresh fiscal initiatives.

Given that the LDP-led ruling coalition still commands only a minority in the Diet, investors are betting that the new administration will prioritize expansionary fiscal measures to secure opposition cooperation. This expectation has further buoyed equity markets and reinforced the risk-on pressure facing the yen.

Ishiba Shock Exit Sparks Bets on Reflationary Fiscal Reset_1

Technical Analysis

GBPJPY is consolidating below the 200.30 resistance, yet the underlying uptrend remains intact. Over the past week, both the swing highs and the swing lows have been successively higher. As long as the 197.93 support holds, a further advance is anticipated.

A sustained break above the 200.26 resistance would revive the up-move that started from 184.35 and open the 100% projection of the 180.00-199.79 segment at 204.14.

On the downside, a clear break below 197.93 would shift the bias to the bear side and expose the next significant support at 195.01.

Trading Recommendations

Trading Direction: Buy

Entry Price: 199.20

Target Price: 204.14

Stop Loss: 197.80

Valid Until: September 23, 2025, 23:55:00

Support: 198.65/197.93/197.38

Resistance: 200.30/201.61/204.14

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