The Japanese currency was last down 0.76% at 151.895 per dollar, after earlier hitting its lowest level against the dollar since October 14, in its biggest single-day decline in two weeks

The yen eased to a one-week low on Tuesday after hardline conservative Sanae Takaichi was elected as Japan’s prime minister, with traders betting her government could muddy the interest rate outlook and bring about a greater fiscal largesse.

Takaichi, the first female PM and leader of Japan’s ruling Liberal Democratic Party, won the lower house vote on Tuesday to choose the next prime minister. The move was widely expected by investors after she was backed by the right-wing opposition party Ishin.

The Japanese currency was last down 0.76% at 151.895 per dollar, after earlier hitting its lowest level against the dollar since October 14, in its biggest single-day decline in two weeks. The yen also struggled against the euro and sterling.

Earlier on Tuesday, media reported that Takaichi had finalized a plan to appoint Satsuki Katayama, a former regional revitalisation minister, as finance minister.

During an interview with Reuters in March, Katayama signalled her preference for a stronger yen. Her appointment could give markets cause to rethink the idea of pushing the yen too low.

We continue to assume that inflation and the purchasing power of private households will remain important issues for the new government in order to improve public approval, said Volkmar Baur, FX & Commodity Analyst at Commerzbank.

Therefore, the new government is unlikely to support a depreciation of the Japanese yen, Baur added.

Still, Takaichi’s support for fiscal stimulus and looser monetary policy kept investors on edge and complicates the Bank of Japan’s path for rate increases.

From a political perspective there may be considerations to delay monetary tightening until fiscal easing gains traction. The BOJ is thus caught between a rock and a hard place, HSBC chief Asia economist Fred Neumann said.