💹USD/JPY Pricing Opposition Win On Sunday: Cable FX Macro

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• Yen crosses remain within recent range as election risks push front-end implieds higher, this may be behind why the yen fails to rise even when the dollar traded softer against G10 peers earlier in the session.

• At present, polymarket betting markets indicate a 64% probability that the current Prime Minister will be removed from office. Additionally, the ruling coalition is anticipated to lose its leadership in the upper house. The fiscal spending proposals from the opposition party are considered negative for the yen. Earlier in the month, we shared a view from the desk at MUFG on dollar-yen upside.

• If these risks materialize, further gains in USD/JPY are anticipated. However, since options are already positioned for this, a significant rally beyond 151.0 is improbable. On the other hand, a surprise victory by the ruling coalition would lead to a scenario of higher volatility, with yen strength likely driving USD/JPY down to 145.0 as risk premiums decrease.