The GBPJPY was slightly higher on Monday as the market reacts to the sudden departure of Japanese Prime Minister Shinzo Abe, who was the longest-serving PM in the country’s history. Traders are studying the race for his successor, alongside the implications for the stability of the wider region.
Abe assumed the Prime Minister role in 2012, where he arrived on the scene with an ambitious plan to end deflation in Japan with policies that the market dubbed “Abenomics”. Although the country didn’t see a return to higher inflation, Abe’s reign has been one of stability in the country and his resignation due to health reasons opens up a range of questions about the future path of the nation.
The race to find Abe’s successor is now heating up within the ruling Liberal Democrat Party (LDP) with Chief Cabinet Secretary Yoshihide Suga seen as a top contender, while a nationwide telephone poll claimed Shigeru Ishiba is the most popular candidate with 34.3% support. The government will hold a meeting on September 17th to choose the country’s new leader.
Suga was one of Abe’s closest advisors so it is unlikely that any radical policy change would occur under his leadership. Ishiba on the other hand, who is currently the leading candidate, has been a critic of the Abe administration and ran against the former PM in 2012. The path of the GBPJPY will focus on market risk sentiment and economics in the next two weeks, but the leadership race will loom in the background and a move to a shift in government policies could see volatility in the GBPJPY pair.
GBPJPY Technical Outlook
GBPJPY saw resistance at the 138.50 level and has managed to clear this to close above the 140.00 level, which will be the key support moving forward. The market will now look to move higher with the previous highs at 144.00-147.00 being the target. A close below 140.00 would be a warning but a close under 138.50 would see bears take control again.