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TOKYO (AFP) - The yen gained ground in Asian trade Tuesday on rising confidence in the outlook for the Japanese economy after unemployment hit a nine-year low and consumer spending rose, dealers said.

They added, however, that the optimism was tempered by political concerns following the suicide by Japan's scandal-hit farm minister.

The dollar fell to 121.46 yen in Tokyo morning trade from 121.68 in late European trade Monday, when markets in the United States and many European countries were closed for national holidays.

The euro was slightly lower at 1.3443 dollars after 1.3456 and at 163.50 yen from 163.74.

"All the economic indicators released earlier in the day showed improvement and players took them as a lead to buy the yen," said Yosuke Hosokawa, head of forex at Chuo Mitsui Trust Bank.

Japan's unemployment rate hit a nine-year low of 3.8 percent in April, falling sharply from 4.0 percent in March, the government said.

Household spending in April rose 1.1 percent from a year earlier, up for a fourth straight month.

But some participants refrained from buying the yen due to concerns about the possible political repercussions of Monday's suicide by farm minister Toshikatsu Matsuoka amid a scandal over political funds and rigged contracts.

"Players -- particularly foreigners -- are more and more concerned about the situation in Japanese politics following the suicide, which can be an excuse to sell the yen," Hosokawa said.

"Players want to know if the Abe administration is still stable. We have to keep an eye on events in Japanese politics up to the elections in the (less powerful) upper house in July," Hosokawa said.

Dealers said US data due for release this week, including March quarter gross domestic product on Thursday and non-farm payrolls for May due out on Friday, are unlikely to be weak enough to raise expectations of a Federal Reserve interest rate cut.

"As such, upbeat US sentiment is likely to keep the dollar underpinned heading into this week's non-farm payrolls release," National Australia Bank analysts wrote in a morning note.