Yen Under Pressure as Japan Sticks to Heavy Spending While U.S. Eyes End to Shutdown

The Japanese Yen continued to struggle on Wednesday, holding near nine-month lows against the U.S. Dollar despite a generally softer Greenback. The currency remains weighed down by Japan’s expansionary fiscal stance and the central bank’s cautious approach to tightening policy.

Japan’s government reaffirmed its commitment to supporting a fragile economic recovery through further spending, signaling a willingness to compile a new supplementary budget exceeding ¥14 trillion. The aim is to counter sluggish domestic demand and modest wage growth, both of which threaten to stall momentum.

At a high-level economic meeting, the prime minister emphasized that Japan has not yet escaped the shadow of deflation and warned that premature or poorly timed policy shifts could undermine consumer confidence and investment. The government also called for closer coordination between fiscal and monetary authorities, underlining the country’s delicate balancing act between stimulus and stability.

Meanwhile, officials in Tokyo reiterated concerns about the Yen’s weakness but stopped short of announcing any immediate intervention. The finance ministry said it is monitoring currency movements “with a high sense of urgency,” a familiar refrain that underscored the government’s unease without committing to concrete action.

Across the Pacific, market attention remained on Washington, where lawmakers were preparing to vote on ending the record-long government shutdown. Hopes for a resolution briefly supported the U.S. Dollar, but gains faded as traders shifted focus to growing expectations of a Federal Reserve rate cut in December. Economists widely anticipate a modest reduction in borrowing costs to support growth amid easing inflation and softening labor data.

Together, Japan’s continued fiscal expansion and the prospect of U.S. monetary easing highlight the diverging paths of the world’s two largest economies — one still fighting to spark inflation, the other looking to manage a cooling cycle. For now, that contrast keeps the Yen on the defensive, with investors cautious about betting on a near-term turnaround.