Rumors of Major Move by Japan’s Prime Minister Send Yen Sliding Sharply

(Tokyo, 12th) Markets are reacting to reports that Japanese Prime Minister Sanae Takaichi may dissolve the House of Representatives earlier than expected, with a snap lower-house election potentially taking place in the first half of February. The prospect of an earlier-than-anticipated dissolution was seen as a surprise, prompting the yen to weaken and briefly slide past 158 per U.S. dollar, marking roughly a one-year low.

Pricing data showed the yen fell 0.59% against the dollar last Friday (9th) to close at 157.87, extending its decline to a fourth consecutive session. It touched an intraday low of 158.18, the first break above 158 since mid-January 2025.

Media reports, citing government-related sources, said Takaichi may be considering dissolving the Lower House around the start of the regular Diet session expected on January 23. Possible election timelines being discussed include:

• Announcement on Jan 27 with voting on Feb 8, or
• Announcement on Feb 3 with voting on Feb 15.
  This would place the election in early to mid-February.

Market observers believe Takaichi’s consistently strong approval ratings could make an early dissolution strategically advantageous for the ruling camp. Reports also note she has emphasized building a “resilient economy” and pursuing a “responsible expansionary fiscal policy,” aiming to strengthen public confidence in her economic agenda.

The ruling party holds 199 seats in the Lower House, and together with its coalition partner totals around 233 seats, narrowly maintaining a majority there. However, the ruling bloc remains short of a majority in the Upper House, keeping Japan in a “twisted Diet” situation where the two chambers are controlled by different majorities.