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✅ Market Shaken by Komeito’s Exit and Trump’s Tariff Threat — A Cautious Start to the Week

✅ Market Shaken by Komeito’s Exit and Trump’s Tariff Threat — A Cautious Start to the Week

🏛 Political Risk and U.S.–China Tensions Collide, Stirring Late-Week Volatility

At the end of last week, markets were rattled by two flashpoints — Japan’s political turmoil and renewed U.S.–China trade friction.
First, the Komeito Party’s withdrawal from its coalition with the Liberal Democratic Party eroded confidence in the political stability that had underpinned the so-called “Takaichi Trade” (yen selling and stock buying).
As a result, Japanese equities plunged, and USD/JPY dropped from the 153 range to the low-151s.

At the same time, U.S. President Trump warned of a 100% tariff on Chinese goods in retaliation for Beijing’s tighter controls on rare-earth exports.
Although he later softened his tone, saying the tariff implementation would be postponed, the initial comments briefly fueled risk-off sentiment.
By the start of this week, however, markets perceived the immediate risk had receded, regaining some composure.

💴 FX and Equities: Yen’s Rise Pauses, Market Direction Limited

  • USD/JPY: After plunging from the 153s, the pair has modestly rebounded, trading in the upper-151 to low-152 range.

  • U.S. equity futures: Rebounding from last week’s drop as risk aversion unwinds.

  • Japanese equities: Political uncertainty still weighs on sentiment, though foreign buying offers some support.

While political risk remains in focus, investors appear cautious about aggressive yen buying, preferring a neutral stance.

💹 Dollar Index: Mild Rebound but Still Range-Bound

The Dollar Index edged higher, recovering from 98.81 to 99.12 (+0.14 / +0.14%).
However, it remains confined within the 98.8–99.4 range, showing no clear trend.
Traders continue to monitor political headlines and U.S. statements, keeping a wait-and-see approach.

🌏 Thin Liquidity Amid Holiday Closures — Beware of Sudden Spikes

Today, Japan (Sports Day), Canada (Thanksgiving), and the U.S. (Columbus Day) are all on holiday.
With the U.S. bond market closed, overall liquidity is sharply reduced, raising the risk of algorithm-driven or headline-triggered price spikes.

Economic data releases are light, featuring:

  • Turkey current account

  • India CPI

  • Germany current account

Key U.S. data remain delayed due to the government shutdown, leaving markets focused on official remarks from events such as the IMF–World Bank meetings and the NABE annual conference.

✅ Summary: Political Headlines Continue to Drive Markets — USD/JPY Settling Into Range

The Komeito coalition exit and Trump’s tariff remarks triggered last week’s volatility, but the market has since stabilized.
USD/JPY is likely to consolidate within the 151–152 range in early-week trading.
With liquidity thin, any surprise headlines could cause outsized reactions.
As political and trade risks continue to overlap, expect headline-driven price action to dominate this week’s market tone.

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