Yen Pressured Despite Intervention Warnings

The Japanese yen traded around 161.5 per dollar on Tuesday, hovering near its weakest levels since 1986 as repeated verbal intervention efforts from Tokyo failed to stem the currency’s decline. Finance Minister Satsuki Katayama said she spoke by phone with US Treasury Secretary Scott Bessent, reaffirming an agreement to coordinate action in currency markets if needed. Investors remain on high alert for another round of official intervention after the yen erased all the gains recorded on April 30, when Tokyo conducted a record-sized currency-buying operation. The yen has remained under pressure despite the Bank of Japan’s recent interest rate hike, which markets view as insufficient to significantly reduce the country's interest-rate differential with other major economies. Additional weakness came from a stronger dollar, supported by hawkish signals from the Federal Reserve.

The Japanese yen weakened to around 161.5 per dollar on Monday, hovering near its lowest level since 1986 as repeated verbal interventions from Tokyo failed to halt the currency’s decline. Finance Minister Satsuki Katayama said authorities stood ready to take appropriate action against excessive currency moves at any time, echoing earlier warnings. The yen has now surrendered all the gains made on April 30, when officials carried out a record-sized market intervention to support the currency. The latest drop came despite the Bank of Japan’s ongoing policy normalization, including a 25-basis-point interest rate increase to 1% last week. The currency also remained under pressure from heavy carry-trade activity, as investors continued to favor short yen positions amid the still-wide interest rate gap between Japan and the US.

The Japanese yen weakened beyond 161 per dollar on Friday, approching again the lowest level since 1986 despite renewed verbal intervention from Japanese authorities. Chief Cabinet Secretary Minoru Kihara said on Thursday that the government remains prepared to respond to excessive currency movements whenever necessary. The yen has now erased all the gains recorded on April 30, when authorities conducted a record-sized intervention to support the currency. The latest decline came despite the Bank of Japan’s gradual tightening cycle, including a 25-basis-point rate hike to 1% earlier this week aimed at addressing an energy-driven inflation shock linked to the Middle East conflict. The dollar also strengthened following the Federal Reserve’s decision to leave interest rates unchanged while signaling increasing support for additional rate hikes later this year. The widening policy divergence between Japan and the US continued to weigh on the Japanese currency.