The yen recouped some of last week’s losses as investors weighed the extent of the defeat suffered by Japan’s ruling coalition in the weekend’s upper-house election.
Asian shares dropped for the first time in three days. Japan’s currency strengthened as much as 0.7% against the dollar, before paring gains.
The yen had dropped for two weeks and bond yields spiked ahead of the vote on concern a poor showing by Prime Minister Shigeru Ishiba would open the door to more spending and tax cuts.
While the ruling Liberal Democratic Party and its partner lost their majority in the chamber, their final tally may be enough to keep Ishiba in the job.
“Some investors had positioned for a larger setback for the coalition and even anticipated Ishiba’s resignation,” said Akira Moroga, chief market strategist at Aozora Bank.
“The unwinding of such positions, combined with relief that a political risk event has passed, contributed to the initial yen rebound.”
Elsewhere, shares in Hong Kong edged up while the regional MSCI Asia Pacific Index declined 0.1%. US equity-index futures edged up 0.1%. Oil held its decline while a gauge of the dollar was flat.
