Politics At The Fore

USD/JPY trades on the back foot, with both sides of the pair losing ground against most of their G10 peers. Receding sense of concern about a record number of encroachments by Chinese warplanes into Taiwan's ADIZ has seemingly given way to optimism around potential spillover from Friday's risk recovery, with the Nikkei 225 and U.S. e-minis edging higher. Regional liquidity is limited by market holidays in China, South Korea and Australia.

• Chatter surrounding the change of the guard at the helm of Japan's ruling LDP and the imminent inauguration of Fumio Kishida as Prime Minister have dominated local headline flow over the weekend. Most of the ministerial nominations have been seemingly leaked to the press. Elsewhere, LDP SecGen Amari told NHK that Kishida won't likely unveil the size of the upcoming stimulus package before this autumn's general election to avoid launching a bidding war during the campaign period.
• Local data releases pick up tomorrow, with Tokyo CPI and final Jibun Bank Services PMI due to hit the wires. Earnings/spending data and BoP current account balance will be published on Friday.
• USD/JPY last changes hands at Y110.96, 9 pips lower on the day. A slide past Aug 11 low Y110.80 would shift focus to the Y109.12/11 area, which limited losses on Aug 16/17 & Sep 15/2. Bulls look to a rebound above Sep 30 high of Y112.08, which would clear the way to Feb 20, 2020 high of Y112.23.