In the US market, regional bank stocks plummeted, triggering a flight to quality amid credit concerns. Gold surged sharply, while the US 10-year yield dipped below 4%.
Reflecting the falling interest rates, the dollar-yen pair declined from the low 151 yen range. It traded around 150.40 yen in the New York afternoon session, and in today’s Asian market, the yen strengthened further, breaking below 149.40 yen.

The extent of US credit concerns remains difficult to gauge. While the dollar-yen pair declined, this could also be seen as a retracement of the high-market trade. The dip immediately after Mr Takai’s election as governor was around 149 yen.
In that sense, a rebound from here would suggest it was a healthy correction.

In France, Prime Minister Lecornu announced that pension reforms would be suspended until after the 2027 presidential election. In response, the centre-left Socialist Party stated that it would not support a vote of no confidence in the Prime Minister.
The spread between French government bonds and their benchmark, German government bonds, narrowed. Meanwhile, in a speech, Fed Chairman Powell stated that his assessment of the labour market continues to be on a downward trend, suggesting that an interest rate cut in October is highly likely.
Against this backdrop, the euro-dollar pair showed signs of a slight rebound.

In Japan, discussions between the various parties are progressing, with the Japan Innovation Party and the Liberal Democratic Party (LDP) moving closer together. Following a meeting between Japan Innovation Party leader Yoshimura and LDP President Takaichi, Mr Yoshimura stated clearly that if policy discussions could be agreed upon, he would nominate Ms Takaichi as prime minister.
In response, the Japan Innovation Party moved rapidly closer to the LDP, and it appears likely that a Takaichi administration will be formed through a coalition. This would seem to signal a revival of the Takaichi trade, but US Treasury Secretary Bessent’s remarks have dampened the mood.
He stated that ‘if the Bank of Japan continues to conduct monetary policy appropriately, the yen exchange rate will settle at an appropriate level.’ However, this implies that the Bank of Japan’s policy is not appropriate and that the appropriate level is a stronger yen than the current level.

This means that the Takaichi trade is no longer simply about a weak yen and strong stocks. The coalition is also likely to put a certain brake on Mr Takaichi’s ultra-loose monetary policy and ultra-aggressive fiscal policy.
The focus is becoming blurred, and it seems we will have to wait for US interest rate cuts.

The US-China conflict is also intensifying, and the market is likely to remain difficult to read.