The Japanese yen is rapidly rising against the US dollar on Thursday. The current USDJPY exchange rate stands at 141.62.
A political scandal is unfolding in Japan, fuelling market expectations for a prompt monetary policy revision and providing an easy exit option from the current quantitative easing format. This could alleviate the cancellation of the ultra-soft interest rate phase.
The issue is the collapse of the Abe Fraction, the once-powerful ruling political party formerly led by ex-Prime Minister Shinzo Abe. Yesterday, the country's current prime minister, Fumio Kishida, announced changes to the composition of the cabinet of ministers. The reshuffling is being done to prevent the consequences of a fundraising scandal. The cabinet will likely lose influential players who historically exerted pressure on the Bank of Japan.
Legally, the BoJ is independent of governmental influence in deciding credit and monetary policy. However, political pressure has been present and was extensive at times.
These developments are worth watching closely. So far, things are shaping up more in favour of changes in the cabinet, positively impacting the JPY.