The Japanese yen fell in the Asian market on Monday against a basket of major currencies, extending losses for the second straight day against the U.S. dollar and moving closer to touching a nine-month low, after data showed that Japans economy contracted in the third quarter of this year due to U.S. tariffs.

The data reinforces Prime Minister Sanae Takaichis inclination to use expansionary fiscal policies to support the countrys weak economic activity, reducing the likelihood of a Japanese interest-rate hike in December.

Price Overview

The dollar rose about 0.2% against the yen to 154.79, from todays opening level of 154.52, and recorded a low of 154.37.

The yen ended Fridays session down by less than 0.1% against the dollar, resuming losses that had paused the previous day in an attempt to recover from a nine-month low at 155.04.

The yen lost about 0.75% against the dollar last week, marking its third weekly decline in a month amid negative pressure following recent remarks by Prime Minister Sanae Takaichi.

Japans Economy

Preliminary GDP data showed that Japans economy contracted by 0.4% in the third quarter of this year, better than market expectations of a 0.6% contraction, after recording 0.5% growth in the second quarter.

This marks the first contraction in six quarters, driven by the hit to Japanese exports from U.S. tariffs, further strengthening Takaichis stance toward using fiscal stimulus to support the countrys weak economic activity.

Takaichi announced last week that she would work on drafting a new multi-year fiscal target to allow more flexibility in spending, a shift that could weaken Japans commitment to consolidating its public finances.

She also renewed calls for the Bank of Japan to exercise caution and slow the pace of rate hikes, stressing the need to balance supporting economic growth with maintaining price stability.

Analysts believe Takaichis remarks may pave the way for a new phase of expansionary fiscal policy to support growth, but they also place additional pressure on the Bank of Japan as it faces challenges in coordinating monetary policy with a less restrictive fiscal stance.

Japanese Interest Rates

Following the above data, market pricing for a 25-basis-point rate hike by the Bank of Japan in the December meeting dropped from 45% to 35%.

To reassess those expectations, investors are awaiting further data on inflation, unemployment, and wage levels in Japan.