Yen at 125 less black swan than gray under Ishiba

TOKYO–The “Ishiba shock” ruining stock investors’ week may only just be beginning for currency traders as the yen looks set to skyrocket.

The reference here, of course, is to the surprise election of Shigeru Ishiba as Japan’s likely next prime minister. The veteran lawmaker, a self-described “lone wolf,” seemed to come out of nowhere last week to best eight other candidates for the ruling Liberal Democratic Party’s leadership.

Yet the real surprise may be how Ishiba’s long-held views set the stage for an epic yen rally.

For now, Ishiba, 67, is downplaying his preference for Bank of Japan rate hikes and a stronger yen. The yen is sliding this week as traders bet Ishiba might not be the monetary hawk they feared. They’re likely wrong.