USD/JPY eyes 155.00 on Trump-Takaichi alliance, reverse carry trade fears

USD/JPY has surged 0.8% to 154.50 following Trump's endorsement of Takaichi ahead of Sunday's Japan elections, stoking expectations of a stronger dollar and potential reverse carry trade unwind. Market participants anticipate Takaichi's likely victory could align Japanese monetary policy more closely with US interests, potentially delaying BoJ normalization while supporting Fed's hawkish stance. The prospect of coordinated US-Japan economic policies has already pushed 10-year JGB yields up 12 basis points to 1.15%, while US Treasury yields climbed 8 basis points to 4.58%. Analysts warn that a Takaichi victory could trigger massive unwinding of yen-funded carry trades, potentially pushing USD/JPY toward 160.00 while causing volatility across global markets. Immediate resistance sits at 155.00 psychological level, with support at 153.80. Traders are positioning for increased volatility through the weekend election.