USD/JPY gains near 152.50 as traders expect Takaichi to back accommodative policies

• USD/JPY appreciates on expectations that PM Takaichi will pursue expansionary and accommodative policies.

• Traders expect the BoJ to hold rates steady next week, with a possible hike in January.

• President Trump expects to reach several agreements with Chinese President Xi Jinping.

USD/JPY extends its gains for the fifth successive session, trading around 152.50 during the Asian hours on Thursday. The pair appreciates as the Japanese Yen (JPY) weakens amid rising likelihood of the new Prime Minister Sanae Takaichi pursuing expansionary fiscal policies and supporting accommodative monetary policy. Meanwhile, the Bank of Japan (BoJ) is widely expected to hold rates steady next week, with markets now eyeing a possible hike in January.

Traders expected Prime Minister Takaichi to introduce a large-scale stimulus package as early as next month. Reports indicated the plan could exceed last year’s JPY 13.9 trillion initiative aimed at easing inflation pressures on households.

The USD/JPY pair also draws support on optimism surrounding the United States (US)-China trade deal. US President Donald Trump said late Wednesday that he expects to strike several agreements with Chinese President Xi Jinping during their meeting in South Korea next week. The Trump-Xi discussions are expected to cover a wide range of issues, including US soybean exports, limiting nuclear weapons, and China’s purchases of Russian Oil.

However, the upside of the pair could be restrained as the US Dollar (USD) may again struggle due to the prolonged US government shutdown, which delays key US economic data releases, including Nonfarm Payrolls (NFP), adding uncertainty for financial markets and the Federal Reserve (Fed). The CME FedWatch Tool indicates that markets are now pricing in nearly a 97% chance of a Fed rate cut in October and a 96% possibility of another reduction in December.