JPY: Yen Surges On Ishiba LDP Victory, Likely Ensuring Policy Continuity

The yen finished Friday's session with a 1.83% gain against the USD, easily the best performer in the G10 space. The late Friday afternoon turnaround was dramatic, from highs near 146.50, the pair slumped back close to 142.00 by late Friday US trade. The Ishiba victory in the LDP leadership run off against Takaichi, a BoJ dove, drove the sharp shift lower in the pair. We sit near 142.50 in early Monday dealings. 

• The run off result was a surprise, given Takaichi was seen as a stronger chance of winning, given her popularity with lawmakers. This likely exacerbated the pullback in USD/JPY as the pair ran higher in the lead up to the run off.
• Focus will now be on Ishiba's policies, although the general sense is that policy continuity from outgoing PM Kishida will be maintained (and therefore gradual continued BoJ policy normalisation).
• Japan equity futures fell sharply in the aftermath of Ishiba's victory on Friday, while JGB futures were down sharply. These will be watch points for USD/JPY today in terms of spill over effects.
• Friday's downshift in US yields, led by the front end post the PCE inflation/spending data, was another yen positive as we progressed through the session.
• For USD/JPY techs, downside focus will rest on 141.74 the Sep 20 low. On the topside, the 50-day EMA at 146.57 wasn't breached in Friday's early up move.
• Today on the data front we  have August IP, retail sales and housing starts on tap.