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Economist and Hedge Fund Manager Shayne Heffernan of www.livetradingnews.com takes a look at the Japanese Yen USD/JPY, EUR/JPY

Asian Markets traded lower on Thursday as investors reacted to the prospect of drawn-out negotiations over the looming U.S. “fiscal cliff” by shedding riskier assets, but Japanese equities defied the trend as a sharp slide in the yen lifted exporters’ shares.

The retreat from risk also weighed on commodities, although oil held its gains after jumping in the previous session due to rising tensions in the Middle East after Israel launched an offensive against Palestinian militants in Gaza.

The dollar was active against the yen in Asia Thursday after climbing in New York on hopes Japanese elections next month will the opposition win, and pave the way for further central bank easing.

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The euro was slightly weaker on the Japanese currency at 102.17 yen, from 102.19 yen, while the European unit bought $1.2737, against $1.2734. European shares were seen falling for a second day, hit by U.S. concerns and the continent’s own intractable debt crisis, with data due later in the day expected to show the euro zone slid back into its second recession since 2009 in the third quarter.

On Wednesday, a senior governing party official confirmed that Japan will hold a general election on December 16, ending months of speculation.

But opinion polls point to dwindling support for Prime Minister Yoshihiko Noda as he heads into a face-off with Shinzo Abe, a conservative and former prime minister.

An Abe victory is seen as a yen-selling factor given his support for further easing by the Bank of Japan, which tends to weigh on the currency.

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The yen has been seen as safe bet by dealers at a time of economic uncertainty, with fiscal turmoil in Europe and the unsteady US economic recovery.

There are also rising fears that the United States could fall off a fiscal cliff of tax hikes and spending cuts if a deal between bitterly divided Republicans and Democrats is not reached before January 1.

Those worries were compounded Wednesday when President Barack Obama challenged Republicans to accept tax hikes for the rich as part of any deal aimed at averting a crisis.

Risk aversion also set in owing to Middle East tensions after an Israeli air strike in Gaza Wednesday that killed a Hamas military chief, reigniting tensions in the region.

And eurozone fears were stoked by huge anti-austerity strikes in Europe, while Greece and Portugal released another set of weak growth data.