Risks associated with parliamentary elections in Japan to affect yen soon – BofA

On Thursday, the campaign period for elections for the upper chamber of parliament began in Japan. The voting is scheduled for July 20. According to the Bank of America experts, the risks associated with the elections, involving weakening of the yen and increased volatility in case of defeat of the ruling coalition party, have not yet manifested themselves in the exchange rate of the Japanese currency. So far, investors' and traders' attention is mostly focused on tariffs and US economic data.

However, as BofA warns, the risks for the yen may appear in the coming days after the publication of election projections by Japanese media outlets.

Bank of America highlighted two factors that will influence the exchange rate of the Japanese currency. One of them is the country's trade negotiations with the US. This week, Donald Trump voiced his doubts about the possibility of concluding a trade deal with Japan before July 9. If no agreement is reached, Japan will face higher tariffs on exports. Such a scenario would be negative for the yen.

Another important factor for the yen dynamics will be the balance of power in the Japanese parliament. Any significant changes suggest a change in the direction of Japan's macroeconomic policy.