According to Jinshi Data on September 26, the yen fell to its lowest level since early September due to uncertainty about the pace of narrowing interest rate differentials after the Federal Reserve's rate cut. So far this quarter, the yen has risen 11% against the dollar after falling to a 38-year low.

Japan faces strong capital outflows, trade deficits and negative real interest rates, which weigh on the yen. Mizuho Securities strategists Masafumi Yamamoto and Masahiro Mihara said the U.S.-Japan exchange rate is likely to continue to fluctuate, and market expectations for the extent of the rate cut at the November Federal Open Market Committee meeting will change with U.S. economic indicators.

Traders are watching the impact of Japan's ruling party leadership election on Friday on the yen. The new party leader may become Japan's next prime minister, and the market is paying attention to the candidates' different monetary policy stances.