Japanese Yen Slips Amid China Tensions

The Japanese yen weakened past 158 per dollar on Friday, surrendering part of the gains sparked by the joint currency intervention by Tokyo and Washington, fueling speculation that authorities may step in again to support the currency. The retreat underscored doubts over the effectiveness of intervention in reversing the yen’s longer-term weakness, which continues to be driven by wide interest rate differentials, growing fiscal concerns, and persistently high energy and import costs. The yen also faced additional pressure from a stronger dollar and rebounding oil prices following renewed tensions in the Strait of Hormuz. Meanwhile, data showed Japan’s household spending fell 3.3% in June, defying expectations for a 1% increase and highlighting continued softness in consumer demand. On the monetary policy front, investors are watching for a possible Bank of Japan interest rate hike in September after the central bank left policy settings unchanged last week.

The Japanese yen traded around 157.6 per dollar on Thursday, pausing its recent rally even as US Treasury Secretary Scott Bessent reaffirmed Washington’s ongoing support for Japan following a historic joint currency intervention. The yen had surged as much as 5% over three sessions after Tokyo and Washington carried out coordinated yen-buying on a scale not seen in decades, with both governments signaling they remain prepared to intervene again if necessary. Bank of Japan data showed Tokyo spent about ¥5.33 trillion during Friday’s operations, after reportedly conducting a record ¥8.45 trillion intervention the day before. The yen had weakened to four-decade lows last month amid higher energy costs, mounting fiscal concerns, and persistently wide interest rate differentials. Meanwhile, the latest data showed Japan’s real wages rose for a sixth consecutive month in June, reinforcing the case for additional BOJ interest rate hikes.

The Japanese yen traded near 157 per dollar on Tuesday, holding onto most of its gains from the previous three sessions as signals of coordinated support from the US and Japan kept markets alert for further intervention. US Treasury Secretary Scott Bessent urged the Federal Reserve to expand its Foreign and International Monetary Authorities Repo Facility, which allows foreign governments to obtain US dollars using their Treasury holdings as collateral. The remarks followed confirmation from both Bessent and President Donald Trump that the US had jointly intervened with Japan to support the yen. Meanwhile, Bank of Japan data showed Tokyo spent around ¥5.33 trillion during Friday’s operations, after reportedly carrying out a record single-day intervention worth ¥8.45 trillion a day earlier. The yen had fallen to four-decade lows last month amid rising energy costs, growing fiscal concerns, and persistently wide interest rate differentials.