The yen has weakened markedly over the last month on anticipation of more aggressive monetary easing as the incoming LDP administration turns the screws on the Bank of Japan. However, the Bank is already committed to significant further easing in order to meet its inflation target and the constraint on the economy is on the demand side not the supply side. This suggests that the election is not a game changer. Indeed, the return of risk aversion could cause the yen to strengthen again.
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