Although Ishiba remains PM, his position has weakened. The yen rose 0.7% against the dollar, while Japanese bonds saw increased volatility. Markets are closely monitoring potential alliances in parliament and ongoing trade negotiations with the US as tensions escalate.

Yen gains as Japan faces a political shake-up after a major election blow

This inflation spike is pivotal ahead of the upper house election on July 20, putting pressure on Prime Minister Shigeru Ishiba administration and prompting government cash handouts to mitigate rising living costs. 

Japan’s inflation hits two-year high ahead of key election

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Yen gains as Japan faces a political shake-up after a major election blow

Japan’s inflation hits two-year high ahead of key election