Yen Slides Further Ahead of Snap Election

The Japanese yen traded near 159 per dollar on Wednesday, remaining under pressure and hovering close to the key 160 level that previously triggered intervention by Japanese authorities in late April and early May to support the currency. Several officials in Tokyo recently suggested there may be no limit to how frequently authorities could step into the foreign exchange market if needed. Strong GDP data also reinforced expectations for a near-term rate hike from the Bank of Japan, with markets increasingly speculating on a possible move as soon as next month following hawkish remarks from policymakers. At the same time, the yen continued to face pressure from the prolonged Middle East conflict, which has kept oil prices elevated and intensified inflation concerns. The situation has boosted the dollar and US Treasury yields as investors increasingly bet that the Federal Reserve may still need to raise rates this year to contain inflation, adding further downside pressure on the yen.

The Japanese yen weakened toward 159 per dollar on Tuesday, marking its seventh straight session of declines despite stronger-than-expected economic growth data. Japan’s economy expanded 0.5% quarter-on-quarter in the first quarter, accelerating from 0.2% in Q4, beating market forecasts of 0.4%, and recording its fastest pace of growth since Q3 2024. The data reinforced expectations that the Bank of Japan could continue raising interest rates, although the outlook remains uncertain as the broader economic impact of the Middle East conflict has yet to be fully reflected in the figures. Meanwhile, the yen is moving closer to the key 160-per-dollar level that previously prompted intervention by Japanese authorities in late April to stabilize the currency. Investors remain watchful for another possible intervention after several Japanese officials indicated there may be no limit to how often authorities can step into the foreign exchange market.

The Japanese yen weakened toward 159 per dollar on Monday, marking its sixth consecutive session of losses as the US dollar continued to strengthen amid rising expectations that the Federal Reserve may need to raise interest rates this year to contain inflation. US inflation accelerated due to an energy price shock stemming from the Middle East conflict, with the US and Iran still failing to secure a peace agreement or make progress toward reopening the Strait of Hormuz. The yen is also edging closer to the key 160-per-dollar threshold that previously triggered intervention by Tokyo authorities in late April to support the currency. Market participants remain alert for another possible intervention, especially after some Japanese officials suggested there are no limits on how frequently authorities can step into the foreign exchange market. Adding to the focus, US Treasury Secretary Scott Bessent expressed support for Japan’s recent efforts to stabilize the yen.