The Japanese yen rose in Asian trade on Friday, extending its recovery for a second consecutive session from a nine-month low against the US dollar, supported by active buying at lower levels and by weakness in the US currency amid mounting concerns over an economic slowdown in the United States.

Despite todays rebound, the yen remains on track to post a weekly loss, pressured by recent comments from Prime Minister Sanae Takaichi that signal a new phase of fiscal stimulus aimed at supporting Japans sluggish economic growth.

Price Overview

USD/JPY slipped 0.15% to 154.31 yen, down from the opening level of 154.51 yen, after touching a high of 154.74 yen.

The yen ended Thursdays session up 0.2% against the dollar its first gain in five days rebounding from a nine-month low of 155.04 yen.

US Dollar

The US Dollar Index fell 0.1% on Friday, marking a second day of declines and approaching a two-week low, reflecting continued weakness in the greenback against a basket of major currencies.

Although the US government has reopened following the longest shutdown in the nations history, markets remain uneasy about the long-term economic impact of the prolonged closure.

Weekly Performance

For the week ending today, the yen is still down around 0.6% against the dollar and is on the verge of recording its third weekly loss this month.

Sanae Takaichi

Prime Minister Sanae Takaichi announced this week that her administration will introduce a multi-year fiscal target allowing greater flexibility in government spending a shift that could weaken Japans commitment to restoring its public finances.

Takaichi also reiterated her call for the Bank of Japan to proceed cautiously and slowly with interest-rate hikes, stressing the need to balance supporting economic growth with maintaining price stability.

Analysts say her remarks may signal a new phase of expansionary fiscal policy, though they also present additional challenges for the Bank of Japan as it attempts to coordinate monetary policy with a more accommodative fiscal stance.

Japan Interest Rates

Market pricing for a 25-basis-point rate hike by the Bank of Japan in December remains below 50%.

Investors are awaiting fresh data on inflation, unemployment, and wage growth in Japan before reassessing rate expectations.