The Japanese yen slid to its weakest point against the U.S. dollar since 1986 on Monday, falling as much as 0.1% to 161.96 per dollar. The currency moved beyond the 161.95 level that was last seen in July 2024, a time when Japanese authorities intervened to shore up the exchange rate.
The yen's depreciation has persisted even after the Bank of Japan tightened policy. On June 16 the BOJ raised its benchmark interest rate to 1%, the highest level recorded since 1995. That step has had limited effect on the yen as market participants price in a continued hawkish stance from the Federal Reserve, which has supported the dollar's strength.
Japanese finance officials have publicly signaled they remain prepared to act to counter excessive speculative moves in the foreign exchange market. Finance Minister Satsuki Katayama said on June 19 that authorities stand ready to take "bold action" if necessary. After meeting with U.S. Treasury Secretary Scott Bessent, Katayama said the U.S. and Japan are increasingly "aligned" on foreign exchange policy and agreed they would take "bold steps" on currencies if required.
Authorities have already intervened in the past month. Between April 28 and May 27, Japan spent a record 11.73 trillion yen - equivalent to $72.5 billion - attempting to support the yen after it first fell past 160 per dollar. Finance Ministry reserve data indicates the government likely used holdings of foreign securities, including U.S. Treasuries, to help finance that currency defense.
The weaker yen has market winners and losers. Japanese exporters are benefiting from stronger overseas price competitiveness, a boost that is reflected in support for the country's stock market. At the same time, the currency's slide raises import costs for commodities priced in dollars, including shipments of oil and gas.
Rising import bills for energy are feeding through to consumer prices for essentials. The increase in costs for oil and gas imported in dollars is contributing to higher prices for items such as food and electricity, with implications for household budgets and sectors that rely on imported energy.
Market data snapshot:
- USD/JPY reached as much as 161.96 - a new low since 1986.
- BOJ policy rate raised to 1% on June 16 - highest since 1995.
- Japan spent 11.73 trillion yen ($72.5 billion) intervening from April 28 to May 27.