Japanese government bonds sold off alongside the currency, with the long-term bond yields rising sharply

Most Asian currencies were subdued on Monday, while the Japanese yen slumped after Sanae Takaichi won the ruling party leadership election, which is seen as supportive of loose monetary policy.

Takaichi, a conservative lawmaker and long-time advocate of expansionary “Abenomics”-style policies, secured victory in the Liberal Democratic Party (LDP) runoff on Saturday with 54.25 per cent of the vote.

Takaichi is poised to be confirmed as prime minister in a parliamentary session in mid-October, barring any resistance from opposition parties. She will become Japan’s first female prime minister.

Her win sets Japan on a path toward more government spending, which is seen as reducing the urgency for monetary tightening by the Bank of Japan.

The yen slid 1.6% to 149.81 yen on the dollar, its biggest one-day drop since May 12.

Japanese government bonds sold off alongside the currency, with the long-term bond yields rising sharply, reflecting expectations of increased issuance to fund stimulus measures.

The US Dollar Index, which measures the dollar against a range of other currencies, gained 0.3 per cent in Asian trading. US Dollar Index Futures added 0.4 per cent as of 04:01 GMT.

Elsewhere in Asia, currency markets were quiet as key markets including China, South Korea, and Taiwan, were closed due to respective public holidays.

The Singapore dollar’s USD/SGD edged up 0.3 per cent, while the South Korean won’s USD/KRW added 0.2 per cent.

The Indian rupee’s USD/INR pair added 0.1 per cent, not far from record highs reached last month.

The Chinese yuan’s offshore pair USD/CNH rose 0.1 per cent, while the Australian dollar’s AUD/USD was largely unchanged.