The Japanese yen fell in Asian trading on Tuesday against a basket of major and minor currencies, extending its losses for the third consecutive session against the US dollar and hitting its lowest level in nine months, as the greenback strengthened amid optimism over the nearing end of the longest government shutdown in US history.
The yen also came under additional pressure from comments by Prime Minister Sanae Takaichi, who signaled the start of a new phase of fiscal stimulus policies aimed at supporting Japans weak economic growth.
Price Overview
USD/JPY rose by 0.25% to 154.49 its highest since February from an opening level of 154.13, after recording a session low at 154.04.
The yen closed Monday down 0.5% against the dollar, marking a second straight daily loss following Takaichis statements.
US Dollar
The US Dollar Index rose around 0.1% on Tuesday, holding gains for a second consecutive session and reflecting continued strength in the greenback against a basket of global currencies.
The advance came as markets anticipated an imminent end to the US government shutdown, particularly after the Senate passed an agreement late Monday that would restore federal funding and bring an end to the record-long shutdown.
The agreement now moves to the House of Representatives, where Speaker Mike Johnson said he intends to hold a vote on Wednesday and send the bill to President Donald Trump for his signature to make it law.
Sanae Takaichi
Late last week, Prime Minister Sanae Takaichi sparked wide debate in Japans economic circles after announcing that her government intends to abandon its current annual fiscal target in favor of a new multi-year spending goal.
This shift means Tokyo will move away from its previous commitments to achieving a balanced budget by a fixed annual deadline a move seen as loosening the long-standing fiscal discipline maintained by past administrations.
Takaichi justified the change by arguing that the annual framework is no longer suitable amid Japans multiple economic challenges including weak growth, slowing industrial output, and rising living costs emphasizing that the new approach will grant the government greater flexibility to manage fiscal policy over a longer horizon.
Analysts believe the move could pave the way for a new phase of expansionary fiscal policy to support growth, though it simultaneously presents new challenges for the Bank of Japan as it seeks to align its monetary stance with a looser fiscal framework.
Interest Rate Outlook in Japan
Market pricing currently assigns around a 50% probability that the Bank of Japan will raise interest rates by 25 basis points at its December meeting.
Investors are awaiting further data on inflation, unemployment, and wage levels in Japan to reassess those expectations.