Yen prices are rallying amid political uncertainty in Japan, while gold has reached record prices. The dollar is on track for significant gains despite recent dips in the yen and euro, impacting global markets.
Yen rises Strengthens as Japan’s Coalition Splits
- Japan’s Komeito party announced on October 10, 2025, it is leaving its 26-year coalition with the Liberal Democratic Party (LDP), endangering Sanae Takaichi’s bid to become Japan’s first female prime minister.[1][2]
- Komeito’s leader Tetsuo Saito cited unsatisfactory responses from the LDP on political funding scandals and policy cooperation as reasons for the split.[3]
- The LDP now must seek backing from opposition parties for Takaichi’s parliamentary approval, making her path uncertain despite her recent party leadership win.[4][1]
- Takaichi, known for her conservative stance and commitment to fiscal stimulus while opposing Bank of Japan rate hikes, previously boosted markets but now faces political headwinds.[5][6]
European Political Uncertainty and Market Impact
- France’s political crisis deepens as Prime Minister Sébastien Lecornu resigned after less than a month in office, unable to secure cross-party support for his cabinet.[7][8]
- President Emmanuel Macron has tasked Lecornu with final negotiations for stability by October 15, but options remain limited amid public dissatisfaction and fragmented parliament.[9][7]
- The pan-European STOXX 600 index remained steady, supported by hopes for easing crisis, though French-German bond spreads reflect cautious investor sentiment.[1]
U.S. Federal Reserve Rate Cut Anticipated
- The Federal Open Market Committee is widely expected to cut interest rates by 25 basis points at the October 28-29 meeting, easing borrowing costs amid signs of a weakening labor market.[10][11]
- Fed funds futures show a 94.6% probability of this rate cut.[1]
- The 10-year U.S. Treasury yield slipped slightly to 4.12% amid government shutdown-related uncertainty.[1]
China Tightens Rare Earth Export Controls
- On October 9, 2025, China expanded export controls to five additional rare-earth metals and related materials, further restricting a critical sector ahead of high-stakes trade talks with the U.S..[12][13][14]
- The expanded controls now cover both upstream rare-earth elements and downstream materials and technologies, complicating supply chains for global tech and defense industries.[12]
- China also increased enforcement on chip import restrictions to reduce dependence on U.S. technology such as Nvidia’s AI processors.[1]
Gold Hits Record Levels Amid Geopolitical and Market Uncertainty
- Gold price briefly surpassed $4,000 per ounce, reaching an all-time high of about $4,059 in early October 2025, fueled by geopolitical tensions, central bank buying, and expectations of U.S. rate cuts.[15][16]
- Silver also hit record highs above $50 per ounce, supported by the broader precious metals rally.[16]
- Prospect of stable Middle East developments after Israel and Hamas agreed on a ceasefire on October 9, 2025, has eased oil prices with Brent crude falling 0.7% to $64.72 per barrel.[17][1]
