The Japanese yen rose in Asian markets on Monday against a basket of major and minor currencies, extending its rebound for a second straight day from an eight-week low against the US dollar, supported by buying activity at lower levels and the dollars defensive stance amid risks of a US government shutdown.

A split within the Bank of Japans board has increased pressure on dovish Governor Kazuo Ueda to move faster on normalizing monetary policy, boosting the likelihood of a Japanese rate hike in October.

Price Overview

USD/JPY fell 0.4% to 148.88, from todays opening at 149.47, after touching a high of 149.51.

The yen ended Friday up 0.2% against the dollar, its first gain in three sessions, after earlier hitting an eight-week low at 149.96.

The yen lost more than 1% against the dollar last week, marking a fifth straight weekly decline and its biggest weekly loss since early July, weighed down by political uncertainty in the worlds fourth-largest economy.

US Dollar

The dollar index fell 0.25% on Monday, extending losses for a second session and pulling back from a three-week high of 98.61 points, reflecting continued weakness of the US currency against major peers.

Beyond profit-taking, the dollars retreat is tied to the looming risk of a US government shutdown if Congress fails to pass a funding bill before the fiscal year ends on Tuesday. Without approval, parts of the government will close on Wednesday, the first day of fiscal year 2026.

Japanese Interest Rates

The Bank of Japan kept interest rates unchanged at 0.5% earlier this month, in line with market expectations.

However, dissenting calls from two board members for a 25-basis-point hike surprised markets and were seen as a signal that the BoJ is less concerned about economic headwinds than previously thought.

The dissenters aimed to push Governor Kazuo Ueda to accelerate the pace of rate increases, as tightening is seen as inevitable sooner or later.

Markets currently estimate about a 50% chance of a 25-basis-point rate hike in October.

A Reuters poll showed a majority of economists expect another 25-basis-point increase in Japanese interest rates by year-end.

To reprice those expectations, investors are awaiting further data on inflation, unemployment, and wages in Japan.