USD up against JPY over surprises from Japan election results and higher-than-expected US inflation

USD approached a 1.5-week-high against JPY after Japanese Prime Minister Fumio Kishida’s ruling Liberal Democratic Party held its strong majority in Sunday’s parliamentary election in a surprise move. This reduces the political uncertainty in the country and allows Kishida to press forward with ramping up stimulus. The surprising result exerts pressure on JPY because more stimulus is expected to devalue the currency.

On the other hand, data released on Friday showed that the U.S. Consumer Price Index rose 0.4% in September, exceeding the median estimate of 0.3%. On a year-over-year basis, the index jumped 5.4%. Economists expected a 5.3% increase. The growth rate has shown an acceleration from August to September. Such a high inflation level has led investors to believe that the Fed will officially announce the asset tapering when it hands down its policy decision this Wednesday.