Forex - USD/JPY lower despite election results

The U.S. dollar traded lower against the Japanese yen to start the week in Asia despite news that Japanese Prime Minister Shinzo Abe’s Liberal Democratic Party scored, as expected an easy victory in the weekend’s elections that decided control of Japan’s upper house of parliament. 

In Asian trading Monday, USD/JPY fell 0.46% to 100.15 after earlier trading as low as 99.62. The pair is likely to find support at 99.45, Thursday’s low and resistance at 101.52, the high of July 8. 

USD/JPY rose 0.18% last Friday and 0.66% for the week. While victory for Abe’s LDP was thought to be a potential boon for yen bears, it was also widely expected, indicating that markets may have efficiently priced in the result in the days leading up the election. 

Gaining control of the upper house of parliament could allow Abe to continue to push through a series of structural reforms aimed at spurring economic growth and fighting deflation. 

Media reports said Abe’s LDP and its partner, the New Komeito party, had won at least 74 of the 121 seats up for grabs in the 242-seat upper house, according to Reuters. It marks the first time since 2007 that Japan will operate without a split parliament. 

There are concerns that now with control of both houses of parliament that Abe will turn his attention to the more conservative side of his agenda, which includes possibly increasing Japan’s military capabilities, but many market participants believe it is unlikely the prime minister will suddenly shift course from making the economy his top priority. 

Japanese stocks appeared to like news of the LDP gaining control of the upper house. The Nikkei 225 was up 0.71% at this writing. 

Elsewhere, EUR/JPY fell 0.42% to 131.66 while AUD/JPY dropped 0.18% to 92.18.