Japan election Sunday sends Yen trading volumes into overdrive

LeapRate has learned from a variety of sources that Japanese Yen trading volumes have spiked the past two weeks, ahead of Japanese general elections tomorrow. Yen volatility over that period, despite the election’s predictable outcome, seems to support what we’ve heard.

This of course follows two near-record months for some of Japan’s leading retail forex brokers, in October and November.

Tomorrow (Sunday, December 14) millions of Japanese voters will head to the polls to elect a new lower house of parliament. Japan’s Prime Minister Shinzo Abe dissolved parliament’s lower house last month, calling a snap election and seeking a fresh mandate for his struggling ‘Abenomics’ revival strategy, just two years after he returned to power promising that ‘Japan is Back’.

Japanese YenAbe’s strategy has centered on reviving the economy with a mix of hyper-easy monetary policy, increased government spending and certain reforms, while at the same time moving ahead with plans to rein in Japan’s massive public debt.

However data is now showing that Japan’s the economy slipped into recession in the third quarter, triggered in part by an increase made in April to Japan’s sales tax rate, raising it to 8% from 5%, as part of Abe’s pay-down-the-debt moves.

Despite Abenomic’s setbacks, polls widely show a landslide victory for Abe’s ruling Liberal Democratic Party.

The Yen has responded by a steady drop in value since the elections were called, with the USDJPY rate crossing the 1.20 line earlier this month for the first time since 2007.

USDJPY one month chart

USDJPY one month chart. Source: Google Finance.

We expect more volatility after the election, especially if Abe’s party does not win the majority being predicted.

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