Yen slides past 161 against the dollar, nearing 40-year low and reviving intervention bets
The yen looked shaky on Wednesday after a precipitous decline overnight, under pressure from wide interest rate differentials between Japan and the rest of the world.
Bibek Raj Giri | An | Getty Images
The Japanese yen surpassed 161 against the US dollar late on Thursday, approaching its lowest level in four decades, and renewed speculation that Tokyo may intervene again to defend the currency.
After Japanese stock markets closed on Thursday, the yen weakened sharply, breaking through 161, and later in the day it extended its decline to 161.80 per dollar, its weakest level since July 2024.
A move above 161.96 against the dollar would leave the yen at its weakest level since 1986.
The decline in the yen led to new warnings from Japanese financial officials. Finance minister Satsuki Katayama reportedly said at the last G7 meeting that Japan was “ready to take decisive steps against speculative moves” in foreign exchange markets.
The currency has remained under pressure despite a more than $70 billion intervention by the finance ministry in May and a recent rate hike by the Bank of Japan that pushed borrowing costs to their highest level since 1995.
Ryozo Himino, Deputy Governor of the Bank of Japan reportedly told parliament The Central Bank was closely monitoring foreign exchange movements due to their impact on the economy and inflation.
Experts told CNBC that intervention efforts have been largely ineffective in containing the yen’s weakness because the factors affecting the currency are structural.
These include high US Treasury yields, which continue to support the dollar, and growth-oriented policies of Prime Minister Sanae Takaichi’s administration, which signal a preference for relatively accommodative monetary conditions.
While the weakening of the yen has helped boost Japan’s exports and economic growth, it has also raised concerns about imported inflation and the erosion of domestic household purchasing power.
