The yen looked punch-drunk on Wednesday after a sudden spill overnight, pressured by wide interest rate differentials between Japan and the rest of the world.
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The Japanese yen breached the 161 level against the U.S. dollar late Thursday, creeping closer to a four-decade low and renewing speculation that Tokyo could intervene again to defend the currency.
After Japanese stock markets closed on Thursday, the yen weakened sharply, crossing the 161 level before extending the fall later in the day to as low as 161.80 per dollar, its lowest since July 2024.
A move beyond 161.96 against the greenback would leave the yen at its weakest since 1986.
The yen’s decline has prompted fresh warnings from Japanese finance officials. Finance minister Satsuki Katayama reportedly said at a recent G7 meeting that Japan was “prepared to take decisive action on speculative moves” in the foreign exchange markets.
The currency has remained under pressure despite more than $70 billion in interventions by the finance ministry in May and a recent rate hike by the Bank of Japan that has lifted borrowing costs to their highest level since 1995.
Bank of Japan Deputy Governor Ryozo Himino reportedly told parliament the central bank was closely monitoring currency movements because of their impact on the economy and inflation.
Experts told CNBC that intervention efforts were largely ineffective in containing the yen’s weakness because the factors affecting the currency were structural.
This included elevated U.S. Treasury yields, which continue to support the dollar, and the growth-focused policies of Prime Minister Sanae Takaichi’s administration, which has signaled a preference for relatively accommodative monetary conditions.
While a weaker yen has helped boost Japan’s exports and economic growth, it has also raised worries around imported inflation and the erosion of domestic household purchasing power.
