The weekend elections in Japan caused the yen to fall to a three-month low, followed by the release of US corporate financial reports, the upcoming UK budget, and the upcoming US elections, making this week full of thrills for financial markets.

After the ruling coalition in Japan lost its parliamentary majority in the weekend elections, the yen fell while the Japanese stock market rose, sparking concerns about political delays and more fiscal stimulus.

The market is also betting that politics will make the work of the Bank of Japan more difficult, and policy normalization has been complicated by a fragile economy and unstable markets. It is expected that the Bank of Japan will maintain its current policy unchanged at the meeting that ends on Thursday.

The loss of the majority of seats in the Japanese parliament by the ruling coalition has increased the possibility that the new government will need to increase spending, making the situation of further interest rate hikes by the central bank more complicated. The ruling Liberal Democratic Party led by Prime Minister Shigeru Ishiba and its long-term partner Komeito failed to secure a majority in the lower house elections held over the weekend, raising doubts about how much longer the 67 year old prime minister can hold on.

Saisuke Sakai, Senior Economist at Mizuho Research and Technologies, said, "Regardless of who is in power, the new government will be forced to adopt expansionary fiscal and monetary policies to avoid burdening voters

The Liberal Democratic Party almost continued to govern after the war, and in order to maintain stable governance, the party may need to seek smaller opposition parties such as the National Democratic Party (DPP) and the Japan Restoration Party (JIP) as alliance partners, or at least form a policy alliance. Both smaller political parties have ruled out the possibility of forming an alliance with the Liberal Democratic Party, but have expressed an open attitude towards certain policy collaborations.

During the election campaign, both the National Democratic Party and the Japan Restoration Party promised to lower the consumption tax from 10%. The proposal from the National Democratic Party also includes reducing electricity bills and taxes for low-income individuals. Sakai said that although Shigeru Ishiba has proposed an additional budget exceeding last year's 13 trillion yen (85 billion US dollars), he may face pressure to propose a plan exceeding 20 trillion yen. Analysts say that the political situation is changing

The intensification of volatility may make it more difficult for the Bank of Japan to shake off decades of monetary stimulus policies. The Bank of Japan terminated its negative interest rate policy in March and raised short-term interest rates to 0.25% in July, believing that Japan is moving towards a sustained 2% inflation target. Bank of Japan Governor Kazuo Ueda has vowed to continue raising interest rates, and economists believe that the overall policy direction will not undergo significant changes immediately.

However, analysts say that the revamped parliamentary structure may cause the Bank of Japan to lose the necessary political stability, making it difficult to escape from a near zero interest rate state.

On Monday, there were relatively few European economic data releases, but in the following week, the Eurozone's third quarter GDP and inflation data will be released, which may validate the dovish stance of the European Central Bank.

The British New Labour government will release its first budget on Wednesday. Investors have already sold off British stocks and treasury bond before this. They are worried about how the Chancellor of the Exchequer Rachel Reeves will balance high debt, public expenditure commitments and the commitment not to raise income taxes.

On Wall Street, the corporate earnings season has also reached its peak. This week will be the busiest week of the quarter, with over 150 companies in the S&P 500 index announcing their third quarter results.

Companies among the five "tech giants" will release their financial reports: Alphabet, the parent company of Google, will announce on October 29th, Meta Platforms, the parent companies of Microsoft and Facebook, will announce on October 30th, and Apple and Amazon will announce on October 31st.

The frequent occurrence of market sensitive events will continue next week, with November 5th being the US election day and November 7th being the Federal Reserve's next monetary policy decision day, which may make investors increasingly nervous in the coming days.

The US employment report on November 1st is equally crucial for investors as they are discussing whether the economy is stronger than expected and whether the Fed's rate cuts will be less than the market's already priced levels.