Yen Languishes at 40-Year Low

The Japanese yen weakened toward 158 per dollar, struggling to gain traction despite renewed verbal warnings from Tokyo. On Monday, Finance Minister Satsuki Katayama reiterated that authorities are prepared to take action if currency movements become excessive or disorderly, while emphasizing continued coordination with the US on foreign exchange matters. Meanwhile, investors are awaiting Japan’s wage data due this week for further indications of the Bank of Japan’s monetary policy direction. Last week, the BOJ kept its benchmark interest rate unchanged at 1.25% but signaled that underlying inflation had finally reached its 2% target, potentially opening the door to a rate hike in December. Elsewhere, safe-haven demand for the yen weakened as the technology stock selloff, driven by growing concerns over artificial intelligence valuations, began to ease. However, disappointing corporate earnings continued to weigh on Japanese equities.

The Japanese yen strengthened toward 157 per dollar on Friday, extending gains for a third consecutive session after the Bank of Japan kept its policy rate at 1.25%, in line with market expectations. The central bank signaled that underlying inflation has finally reached its 2% target, potentially paving the way for a rate hike in December. The decision was reached by an 8-1 vote, with board member Hajime Taka dissenting in favor of raising rates to 1.5%, arguing that conditions have entered a new phase that warrants a faster move toward a neutral interest rate. Meanwhile, the yen received additional support from safe-haven demand as disappointing earnings from major technology companies revived concerns over AI-related investments and triggered another equity selloff. Furthermore, global asset managers have begun returning to Japan’s bond market as improving domestic demand and a more favorable monetary policy outlook increase the attractiveness of relatively higher yields.

The Japanese yen steadied around 157.7 per dollar on Thursday after coming under pressure earlier in the week, as investors awaited the Bank of Japan’s upcoming policy announcement. The central bank is widely expected to keep interest rates unchanged, although policymakers could signal a potential rate hike in December amid persistent inflationary pressures. Investors are also monitoring upcoming Japanese economic data, including unemployment, industrial production, retail sales, and Tokyo’s inflation figures, which are due ahead of the BOJ decision. Meanwhile, the US Federal Reserve maintained interest rates as widely anticipated, though two officials dissented in favor of a 25-basis-point increase, strengthening market expectations for a possible rate hike in December. Elsewhere, the yen received renewed safe-haven support as disappointing earnings from Alphabet and Samsung revived concerns over the sustainability of AI-related investments.