AsianFin -- The yen weakened sharply on Monday after Japanese Prime Minister Shigeru Ishiba announced his resignation, raising the prospect of policy uncertainty in the world’s fourth-largest economy.

In Asia trading, the yen dropped 0.6% against the dollar to 148.25, while also tumbling to more than one-year lows against the euro and sterling at 173.91 and 200.33, respectively. Investors said the sudden political shake-up could pave the way for leadership more open to looser fiscal and monetary policy.

Markets are watching closely to see if Ishiba’s successor could be Liberal Democratic Party veteran Sanae Takaichi, who has criticized the Bank of Japan’s recent rate hikes and signaled support for more accommodative measures. That shift could weigh further on the yen, which has already been under pressure from widening interest rate differentials with the U.S. and Europe.

Meanwhile, the U.S. dollar was nursing losses after tumbling late last week on a weaker-than-expected jobs report. The data cemented expectations that the Federal Reserve will cut interest rates at its upcoming policy meeting, sending Treasury yields lower and triggering a broad retreat in the greenback.

“The combination of U.S. rate cut bets and Japan’s political uncertainty leaves the yen exposed to heightened volatility in the near term,” said one Tokyo-based FX strategist.

Traders are also keeping a close eye on developments in Europe, where French Prime Minister Francois Bayrou faces a confidence vote on Monday that he is widely expected to lose. A defeat could deepen France’s political crisis and add pressure on the euro, which has already been volatile in recent weeks.