The Japanese yen weakened in Asian trading on Monday against a basket of major and minor currencies, extending losses for a second consecutive session versus the U.S. dollar, as the greenback gained on optimism surrounding an end to the longest government shutdown in U.S. history.

Japanese Prime Minister Sanae Takaichi announced that her government plans to abandon its current annual fiscal target in favor of a new multi-year spending framework a move that could pave the way for a new era of expansionary fiscal policy aimed at supporting Japans sluggish economy.

Price Overview

USD/JPY rose 0.4% to 154.03, up from Fridays closing level of 153.41, after touching an intraday low of 153.40.

The yen ended Friday down 0.25% against the dollar following weak household spending data.

For the previous week, the yen gained about 0.4% against the dollar, marking its first weekly rise in three weeks on renewed hopes of a December rate hike by the Bank of Japan.

U.S. Dollar

The U.S. Dollar Index rose 0.2% on Monday, heading for its first gain in four sessions, reflecting renewed strength in the greenback against major and minor peers.

The rebound followed increased optimism that the longest U.S. government shutdown in history could soon end, after the Senate approved the first stage of a bipartisan deal to reopen the federal government with funding measures extending through January.

Sanae Takaichis fiscal shift

Takaichis remarks at the end of last week sparked wide debate across financial circles after she said the government would replace its annual fiscal balance target with a broader, multi-year spending objective.

The shift signals Tokyos move away from its long-standing commitment to achieving a balanced budget by specific annual deadlines a departure seen as loosening Japans traditionally strict fiscal discipline.

Takaichi argued that the annual framework is no longer suitable amid Japans multiple economic challenges, including weak growth, slowing industrial output, and rising living costs. She said the new approach would grant greater flexibility in managing fiscal policy over the medium term.

Analysts noted that while the decision could usher in a phase of fiscal expansion to boost growth, it also poses new challenges for the Bank of Japan in coordinating monetary policy with a more accommodative fiscal stance.

Japanese Interest Rates

Although BOJ Governor Kazuo Ueda recently delivered his strongest signal yet that an interest rate hike could come in December, markets remain skeptical of the central banks gradual approach.

Current market pricing suggests roughly a 50% chance of a 25-basis-point rate hike at the December meeting.

Investors are awaiting upcoming data on inflation, unemployment, and wage growth in Japan to reassess those expectations.