USD/JPY jumps as Japan's governing coalition loses Upper House majority

USD/JPY experienced a sharp rally Monday following news that Japan's governing coalition lost its majority in the Upper House elections, creating significant political uncertainty in the world's third-largest economy. The political development raises questions about the stability of current economic policies and the Bank of Japan's ability to maintain its ultra-accommodative monetary stance. Markets are interpreting the election outcome as potentially limiting the government's capacity to implement fiscal reforms or support the BOJ's gradual policy normalization efforts. The political instability adds another layer of complexity to Japan's economic challenges, including persistent low inflation and demographic pressures. For forex traders, the election results suggest increased volatility in yen pairs, with USD/JPY likely to test higher resistance levels as political uncertainty weighs on the yen. Near-term resistance may emerge around recent highs, while support could develop at pre-election levels.