The Liberal Democratic Party of Japan suffered a disastrous defeat in the House of Representatives election, with the yen depreciating to three lows.

In early October, newly appointed Prime Minister Shigeru Ishiba called for early elections, but the result backfired, as the ruling coalition failed to win a majority in the parliament for the first time since 2009, leading to a power struggle between the two major groups and causing Japan to face a period of political instability. The yen fell to a three-month low, while the Japanese stock market rose due to expectations that the coalition government would significantly increase spending plans to boost the economy.

The ruling coalition faced a major defeat, casting a shadow of political uncertainty over Japan.

NHK's statistics show that the Liberal Democratic Party and the Komeito Party together won 215 seats, below the 233 seats needed for a majority in the House of Representatives, while another 250 seats were divided among six other parties.

Political uncertainty may complicate the outlook for the Bank of Japan. The Bank of Japan is striving to find the right timing to raise interest rates again, with the market generally expecting the central bank to maintain interest rates at the meeting on October 31.

Will the Bank of Japan raise interest rates in December?

According to Bloomberg, Takeshi Minami, chief economist at the Norinchukin Research Institute, believes that a rate hike by the Bank of Japan in December remains the main expectation in the current market:

The Liberal Democratic Party suffered a devastating defeat, and although there is still time until December, the difficulty lies in the fact that the Bank of Japan has stated it will not raise interest rates during market turmoil. The impact of the US presidential election is still to be observed, thus increasing market uncertainty.

(Does the Bank of Japan's hawkish rate hike to 0.25% signal the official end of the cheap yen?)

The yen continues to depreciate.

The US dollar has risen against the Japanese yen for four consecutive weeks, currently quoted at 153.88. Although it is still far from the July peak of 161.95, Japanese foreign exchange official Atsushi Mimura warned last week that he is closely monitoring the exchange rate trends, increasing the risk of Japanese authorities returning to the market to protect the yen.

Traders, considering political uncertainty and the uncertainties facing the Bank of Japan in raising interest rates again, have seen the yen depreciate more than 6% this month, making it the worst-performing currency among the G10. The market's anticipated resurgence of Trump trades has also strengthened the dollar, further prompting the depreciation of the yen.

(What happens if Trump's chances of winning increase? Is Bitcoin also considered a Trump trade?)

This article reports that the Liberal Democratic Party of Japan suffered a disastrous defeat in the House of Representatives election, with the yen depreciating to three lows, first appearing on Chain News ABMedia.