Japan's Sanae Takaichi Navigates Yen Dilemma Ahead of Crucial Election

• Japanese PM Sanae Takaichi faces a delicate balancing act with the Yen and bond yields ahead of the February 8 election.
• Actions to control bond yields risk weakening the Yen further, fueling imported inflation, while propping up the Yen could harm the stock market rally.
• Authorities are using strong rhetoric and perceived US cooperation to manage market volatility, with speculation of coordinated action bolstering the Yen.
• The Yen strengthened against the dollar following reports of US exchange rate checks and speculation of US-Japan coordination.
• A new cabinet and budget post-election are expected to ease the challenge of managing the Yen and yields, with stability crucial in the interim.

Why It Matters: Sanae Takaichi faces a complex economic balancing act to maintain market stability before Japan's election.