Sanae Takaiichi, the Prime Minister of Japan, led her ruling Liberal Democratic Party (LDP) to a decisive victory in the House of Representatives election held on the 9th, securing more than two-thirds of the seats. This political outcome reversed the previous decline of the Japanese yen, as concerns over expansive fiscal policies had led to a weakening of the currency. On the morning of the 11th, the yen was trading at 154.02 to 154.03 yen per dollar, representing a 2% recovery from a previous high of 157.12 yen per dollar just before the election.

Since Takaiichi assumed office as the LDP leader on October 21st, the yen had been in a decline due to her advocacy for aggressive fiscal expansion, which included a record supplementary budget in December. Following her election success, market analysts noted a shift in sentiment, indicating that previous fears surrounding budgetary policies had diminished. In a press conference following her victory, Takaiichi emphasized a break from excessive fiscal tightening and the need to enhance investor confidence, asserting that the ongoing reduction in the food consumption tax is a temporary measure. Consequently, bond yields in Japan began to fall as the yen strengthened, leading to significant changes in the foreign exchange market.

On the same day, U.S. projections for retail sales in December 2025 indicated a stagnant growth of just 0.4%, which contributed to a weakened dollar and a strengthened yen. Forex analysts observed that the strengthening of the yen had a suppressive effect on the won-dollar exchange rate, indicating a shift in the market dynamics influenced by recent political developments in Japan. As Takaiichi's administration appears set to advance policies aimed at enhancing economic stability and restoring trust in the markets, the implications for Japan's financial landscape remain closely watched in both domestic and international contexts.