Emergency Declarations Take Effect, LDP Suffers Electoral Defeats

USD/JPY re-opened higher as trading went underway in Tokyo, but has already pared most of its early gains. The pair last operates at Y107.92, a touch higher on the day.

• The gov't formally declared a Covid-19 state of emergency in Tokyo, Kyoto, Hyogo and Osaka on Sunday, which will run through May 11, covering the "Golden Week" holidays. PM Suga said the gov't has set aside Y500bn to support businesses as new restrictions take effect, but is not planning another supplemental budget
• Meanwhile, Suga suffered a major political defeat over the weekend, as his LDP lost all three seats contested in Sunday's parliamentary by-elections, including that in a traditionally conservative constituency in Hiroshima. The by-elections had been seen as a bellwether of a general elections later this year.
• The BoJ deliver their latest monetary policy decision & outlook report tomorrow, with Gov Kuroda scheduled to hold a presser.
• Later in the week, focus turns to retail sales (Wednesday) as well as unemployment, Tokyo CPI, flash industrial output & final Jibun Bank M'fing PMI (Friday).
• From a technical point of view, bears look for a dip through Y107.48, where the rate bottomed out on Friday. A break here would open up Y106.97, the low print of Mar 4. Bulls seek a rally above the 50-DMA at Y108.32 would shift focus to Apr 9 high of Y109.96.