• The Japanese Yen weakens in reaction to political development after Sunday’s election.
• The uncertainty over the BoJ’s rate-hike plan weighs heavily on the JPY amid a bullish USD.
• Bets for a less aggressive Fed policy easing and rising US bond yields underpin the buck.

The Japanese Yen (JPY) drops to a fresh three-month low against its American counterpart during the Asian session on Monday after Japan’s longtime ruling party lost its majority for the first time in 15 years at Sunday's national election. The outcome fueled speculations that the coalition government might pressure the Bank of Japan (BoJ) to take policy normalization slowly, which, in turn, is seen weighing heavily on the JPY. This, along with the underlying strong bullish tone surrounding the US Dollar (USD), lifts the USD/JPY pair beyond the mid-153.00s. 

Meanwhile, the incoming US macro data continues to point to a still resilient economy and reaffirms market expectations that the Federal Reserve (Fed) will proceed with smaller rate cuts over the year. Furthermore, rising odds of Donald Trump winning the presidency and deficit-spending concerns after the US election trigger a fresh leg up in the US Treasury bond yields. This assists the USD Index (DXY) in standing firm near its highest level since July 30 and suggests that the path of least resistance for the lower-yielding JPY remains to the downside.