The Japanese yen declined in Asian trading on Wednesday against a basket of major and minor currencies, extending losses for a fourth straight session against the U.S. dollar. The currency is now nearing a five-week low touched during Tuesdays session, as political uncertainty in Japanthe worlds fourth-largest economycontinued to weigh.

Less hawkish comments from a Bank of Japan board member further reduced the likelihood of a rate hike before year-end, with investors awaiting stronger evidence on the path of policy normalization.

Price Overview

USD/JPY rose about 0.4% to 148.92, up from the sessions opening at 148.36, after touching a low of 148.26.

On Tuesday, the yen closed down 0.8% against the dollar, its third consecutive daily loss and the steepest decline since July 31, hitting a five-week low of 148.94 amid heavy selling pressure.

Political Uncertainty

Hiroshi Moriyama, secretary general of Japans ruling party and a close ally of Prime Minister Shigeru Ishiba, announced his resignation, deepening the political crisis and casting doubt over Ishibas future.

The development followed increased pressure on Ishiba after recent electoral losses, as calls for his resignation have intensified. So far, Ishiba has resisted stepping down. Analysts say Moriyamas departure could weaken Ishibas internal support and increase the likelihood of further political pressure in the near term.

The situation has opened the door for Sanae Takaichi as a leading contender to succeed Ishiba. Known for her economic stance favoring persistently low interest rates, her potential leadership is seen as reinforcing expectations for a more accommodative monetary path.

Market Commentary

Kit Juckes, chief FX strategist at Socit Gnrale, said: On the surface, political uncertainty, and the potential resignation of Prime Minister Shigeru Ishiba in the coming days or weeks, is weighing negatively on the yen.

Lee Hardman, senior currency analyst at MUFG, added: The deepening political uncertainty is likely to remain a drag, while the lack of a strong hawkish signal from Deputy Governor Ryozo Himino on Tuesday will encourage speculators to rebuild short yen positions.

Japanese Interest Rates

Deputy Governor Ryozo Himino noted that the BoJ should continue raising rates, but emphasized that global economic uncertainty remains high, reducing the urgency to tighten borrowing costs.

Board member Nakagawa warned of risks from trade policy and said he is awaiting the upcoming Tankan survey for clearer guidance on the normalization path.

Markets currently price less than a 30% chance of a quarter-point hike at the September meeting.

Investors are closely monitoring upcoming data on inflation, unemployment, and wage growth in Japan, alongside further comments from BoJ officials, to reassess rate expectations.