After Japanese stock markets closed on Thursday, the yen depreciated sharply, breaching the 161 level against the dollar and later touching 161.80. This was the currency\u2019s lowest level since July 2024. A move beyond 161.96 per dollar would mark the weakest yen since 1986.<\/p>\n
The latest decline follows more than $70 billion in foreign-exchange interventions conducted by Japan\u2019s finance ministry in May. These efforts were aimed at stabilizing the yen, which has been under sustained pressure. In parallel, the Bank of Japan has raised interest rates, lifting borrowing costs to their highest level since 1995, but these steps have not reversed the currency\u2019s downtrend.<\/p>\n
The yen\u2019s continued weakness has drawn renewed attention from policymakers. Finance minister Satsuki Katayama reportedly told counterparts at a recent G7 meeting that Japan was \u201cprepared to take decisive action on speculative moves\u201d in foreign-exchange markets. Separately, Bank of Japan Deputy Governor Ryozo Himino reportedly told parliament that the central bank was closely monitoring currency movements because of their impact on the economy and inflation.<\/p>\n
Experts cited by CNBC described the recent interventions as largely ineffective in containing the yen\u2019s depreciation, pointing instead to structural drivers. These include elevated U.S. Treasury yields, which support the dollar, and the growth-focused policy stance of Prime Minister Sanae Takaichi\u2019s administration, which has indicated a preference for relatively accommodative monetary conditions.<\/p>\n
A weaker yen has supported Japan\u2019s export sector and contributed to economic growth, but it has also intensified concerns about imported inflation and the erosion of domestic household purchasing power. The tension between export competitiveness and inflation risks remains central to the policy debate as authorities weigh the costs and benefits of further intervention.<\/p>\n
Why is the yen approaching a multi-decade low?<\/strong> What actions has Japan taken to support the yen?<\/strong> What are Japanese officials saying about possible further intervention?<\/strong> How does a weaker yen affect Japan\u2019s economy?<\/strong>
The yen is weakening due to structural factors such as elevated U.S. Treasury yields that bolster the dollar and Japan\u2019s relatively accommodative monetary stance, despite interventions and a recent rate hike.<\/p>\n
Japan\u2019s finance ministry conducted more than $70 billion in currency interventions in May, and the Bank of Japan raised interest rates to their highest level since 1995 in an effort to stabilize the yen.<\/p>\n
Finance minister Satsuki Katayama has indicated Japan is prepared to take \u201cdecisive action on speculative moves,\u201d and Bank of Japan Deputy Governor Ryozo Himino has said the central bank is closely monitoring currency movements.<\/p>\n
A weaker yen supports exports and growth but raises concerns about higher imported inflation and the reduction of domestic household purchasing power.<\/p>\n