The yen hit a three-month low against the euro and fell versus the dollar on Friday as more Japanese lawmakers were seen opposing reform bills whose rejection could lead to a snap election.
Hirofumi Nakasone, an upper house member of the ruling Liberal Democratic Party who had been seen among swing voters, told party leadership that he would oppose the bills to privatise the nation's vast postal system.
A few more lawmakers were seen likely to follow Nakasone, slightly tilting odds against the bills being passed when the upper house vote is held on Monday.
Prime Minister Junichiro Koizumi has said that rejection of the bills, opposed by many in the LDP, would be tantamount to a vote of no-confidence, a tacit threat to call an election.
Currency analysts and traders said a "no" vote would result in knee-jerk selling of the yen but the downside could be limited given upbeat economic data coming out of Japan.
"Once the vote is out of the way, the yen will likely rebound due to good economic data, even if the bills are rejected," said Hideki Hayashi, global strategist at Shinko Securities.
The euro was seen supported by investor caution ahead of US payrolls data for July data due at 1330 BST and receding pessimism about growth prospects in the euro zone.
The euro rose to its highest level in two months against the dollar on Thursday due partly to investors reshuffling positions before the jobs data.
But while there is limited room for a further sharp rise, the single currency could still edge higher as the dollar is getting top-heavy because the market has largely digested a positive US growth scenario, analysts said.
"The euro may remain supported for now, given recent good data, but current levels may not be sustainable for very long," said Hayashi.
Over the past week, euro-zone data has shown the German jobless rate down for a fourth month, money supply growing and consumer prices ticking up - leading some traders to conclude the next direction for the key euro-zone interest rate is up