Holograms, which show different images and colours depending on the angle at which they are viewed, are seen on the new Japanese 5,000 yen banknote as the new note is displayed at a currency museum of the Bank of Japan, on the day the new notes of 10,000 yen, 5,000 yen and 1,000 yen went into circulation, in Tokyo, Japan July 3, 2024. REUTERS/Issei Kato/Pool

By Rae Wee and Joice Alves

SINGAPORE/LONDON (Reuters) -The yen eased to a six-day low after hardline conservative Sanae Takaichi was elected as Japan's first female prime minister, with traders betting her government could bring about a muddied rate outlook and greater fiscal largesse.

Takaichi, leader of Japan's ruling Liberal Democratic Party, won the lower house vote to choose the next prime minister on Tuesday.

The move was widely expected by investors after she was backed by the right-wing opposition party Ishin.

The Japanese currency was last down 0.25% at 151.35 per dollar <JPY=>, after touching 151.61, its lowest level against the dollar since October 15.

The yen also struggled against the euro and sterling.

"While fiscal stimulus is expected, it is unlikely to be bold given the difficulties of policy management," said Hirofumi Suzuki, chief FX strategist at SMBC.

"A sharp depreciation of the yen is likely to be avoided, with gentle downward pressure on the yen expected to persist."

Earlier on Tuesday, local media reported that Takaichi had finalised 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.

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," said HSBC chief Asia economist Fred Neumann.

In the broader market, currencies were mostly rangebound despite an overall upbeat market mood after U.S. President Donald Trump said on Monday he expects to reach a trade deal with Chinese President Xi Jinping. And, White House economic adviser Kevin Hassett said that the 20-day U.S. federal government shutdown was likely to end this week.

Jitters over credit risks among U.S. banks also dissipated slightly.

The dollar index, measuring the currency against six peers drew support from a weaker yen and rose to a six-day high. It was last up 0.2% to 98.787.

The euro fell 0.15% against a strengthening dollar to $1.1623, little helped by easing political uncertainty in France.

(Reporting by Rae Wee in Singapore and Joice Alves in London; Editing by Kim Coghill)