The Japanese yen is sliding against its major currency rivals, including the US dollar, on Tuesday. Tokyo has been reeling from disappointing economic data, surging COVID-19 infections, and a resigning prime minister. These events could further weigh on the yen heading into the final few months of 2021.

The Cabinet Office released the preliminary economic index for July, reporting a tepid drop to 104.1, down from 104.6 in June. The coincident index also dipped from 94.6 in June to 94.5 in July. Both indexes essentially cover account inventory ratios, machinery orders, stock prices, and a few other leading economic indicators.

This comes one day after Ministry of Internal Affairs & Communications confirmed that household spending rose 0.7% year-over-year in July, falling short of the median estimate of 2.9%. This disappointing reading was driven by easing in housing, utilities, furniture, medical care, and education. But it was offset by gains in food, apparel, and transportation.

On a monthly basis, Japanese household spending slipped by 0.9%, missing the market forecast of 1.1%.

Average cash earnings edged up 1% year-over-year in July, better than economists’ projections of 0.8%.

Late last week, Prime Minister Yoshihide Suga announced that he would be stepping down after a year in office as he will not be seeking the Liberal Democratic Party (LDP) leadership. He noted that he does not want to miss focusing on the resurgence of COVID-19 cases by running for re-election.

Indeed, the world’s third-largest economy has seen an explosion in coronavirus infections, with the seven-day average topping 15,000. This is the highest it has been, even during the previous waves. In total, the total number of cases has hit 1.58 million, while the death toll has topped 16,000.

“I want to focus on coronavirus response, so I told the LDP executive meeting that I’ve decided not to run in the party leadership race,” Suga told reporters. “I judged that I cannot juggle both and I should concentrate on either of them.”

Meanwhile, in the Japanese bond market, the benchmark 10-year yield dipped 0.001% to 0.038%. The three-month bill was unchanged at -0.099%, while the 30-year bond edged up 0.001% to 0.0665%.

The USD/JPY currency pair rose 0.32% to 110.19, from an opening of 109.85, at 15:13 GMT on Tuesday. The EUR/JPY increased 0.13% to 130.54, from an opening of 130.39.