Yen Falls to 18-Month Low as Election Uncertainty Sends Asian FX into Volatility; Won Reverses Gains

The Japanese yen slid to around JPY 156 per USD — its weakest level in about 18 months — as speculation over potential snap elections in Japan increased political uncertainty. The decline is driven by the Bank of Japan’s continued ultra-easy policy, widening U.S.-Japan interest rate differentials, and rising energy import costs that have narrowed Japan’s current account surplus. Markets are watching for verbal or direct intervention by the Ministry of Finance after authorities warned they are monitoring currency moves with “a high sense of urgency.” Separately, the South Korean won reversed earlier gains after hedge fund manager Scott Bessent’s bullish comments on Korean assets initially spurred foreign buying; profit-taking, overbought technical conditions, and regional concerns (including China’s slowdown) caused a sharp pullback. Key weekly moves cited: JPY -1.8% vs USD and KRW +0.3% (reversed from +1.2%). Other regional moves included modest depreciations in the Chinese yuan and Indian rupee. Analysts highlight policy divergence (notably real yield differentials), energy/import costs, and investor sentiment as the main drivers. Market implications include greater export competitiveness for weaker currencies, higher imported inflation risks, increased hedging needs for corporates, and possible central-bank intervention. Strategists at Goldman Sachs and Morgan Stanley suggest the yen may remain under pressure until BOJ signals normalization, while Korea’s fundamentals (semiconductors, fiscal discipline) still underpin the won longer-term. For traders: expect continued FX volatility tied to political headlines, central-bank communications, U.S. rate expectations, and flows from large global funds. Risk management and diversified exposure are recommended over one-directional currency bets in the near term.