Asian shares remained mostly steady on Monday, while the yen saw modest gains following Japanese elections that weakened the ruling coalition’s control. The market reaction was muted, partly due to a market holiday in Japan. The election results have raised questions about Prime Minister Shigeru Ishiba’s future, though he has indicated his intention to remain in office.
Currency markets responded with the yen rising 0.4 per cent to 148.29 against the dollar. Analysts suggest that Ishiba’s need to seek broader support could lead to looser fiscal policies, potentially impacting bond yields. “Ishiba will try to govern with support from some within the opposition, but this likely means a looser fiscal policy and is not good news for bond yields,” said Rodrigo Catril, a senior FX strategist at NAB.
Elsewhere in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan experienced a slight dip of 0.1 per cent, while South Korean stocks saw a gain of 0.5 per cent. Investors are also closely monitoring developments in trade negotiations between the United States and the European Union. US Commerce Secretary Howard Lutnick expressed confidence that a trade deal could be reached before the upcoming August 1 tariff deadline.
Adding to the trade discussion, reports indicate that President Trump and Chinese leader Xi Jinping are potentially arranging a meeting, though potentially not until October. European Commission President Ursula von der Leyen is scheduled to meet with Xi this Thursday.
