Yen Falls Amid Japan Rising Political Uncertainty

(RTTNews) - The Japanese yen weakened against other major currencies in the Asian session on Monday, after Japanese Prime Minister Shigeru Ishiba announced over the weekend that he will step down amid intensifying rifts within the ruling party.

Asian stock markets traded higher as weaker-than-expected US jobs data reinforced expectations of a quarter point interest rate cut by the U.S. Fed in September. Most currencies in the region also gained strength against a weak U.S. dollar.

CME Group's FedWatch Tool is currently indicating a 90.0 percent chance of 25 basis point rate cut at the September 16-17 meeting and a slim 10.0 percent chance of a 50-basis point rate cut.

Traders also look ahead to reports later in the week on consumer and producer price inflation, which could further impact the outlook for interest rates.

Data from the Cabinet Office showed that Japan's gross domestic product climbed a seasonally adjusted 0.5 percent on quarter in the second quarter of 2025. That beat expectations for an increase of 0.3 percent, which would have been unchanged from the previous reading.

On an annualized basis, GDP rallied 2.2 percent - handily beating forecasts for an increase of 1.0 percent, which again would have been unchanged.

GDP capital expenditure was up 0.6 percent on quarter, missing expectations for an increase of 1.3 percent. External demand was up 0.3 percent on quarter and private consumption rose 0.4 percent on quarter.

Data from the Bank of Japan showed that the overall bank lending in Japan was up 3.6 percent on year in August, coming in at 646.058 trillion yen. That topped forecasts for an increase of 3.2 percent, which would have been unchanged from the July reading.

Data from the Ministry of Finance showed that the Japan posted a current account surplus of 2.684 trillion yen in July. That was well shy of expectations for a surplus of 2.266 trillion yen following the 1.348 trillion-yen surplus in June.

Exports were down 4.9 percent on year at 9.006 trillion yen and imports sank an annual 7.4 percent to 9.195 trillion yen for a trade deficit of 189 billion yen.

The capital account saw a deficit of 16.3 billion yen, while the financial account posted a surplus of 2.028 trillion yen.

In the Asian trading today, the yen fell to near 1-1/2-month lows of 173.91 against the euro and 185.89 against the Swiss franc, from Friday's closing quotes of 172.75 and 184.69, respectively. If the yen extends its downtrend, it is likely to find support around 174.00 against the euro and 186.00 against the franc.

Against the pound and the U.S. dollar, the yen slid to nearly a 1-month low of 200.35 and a 4-day low of 148.58 from last week's closing quotes of 199.14 and 147.41, respectively. The aussie may test support near 201.00 against the pound and 151.00 against the greenback.

The yen dropped to 107.35 against the Canadian dollar, from Friday's closing value of 106.59. On the downside, 109.00 is seen as the next support level for the yen.

Looking ahead, U.S. consumer inflation expectations for August and consumer credit change for July are slated for July are slated for release in the New York session.