Overview
- The yen slid to around ¥161.96–162 against the dollar on Monday, a level not seen since 1986, as traders bet on further U.S. rate increases.
- The Bank of Japan raised its policy rate to 1.00 percent on June 16 and said it could raise rates again, but that move has not closed the gap with U.S. interest-rate expectations.
- Tokyo mounted a record ¥11.73 trillion intervention from April 28 to May 27 to defend the yen and officials, including Finance Minister Satsuki Katayama, have warned they stand ready to take bold action and have discussed coordination with the U.S. Treasury.
- A weaker yen is lifting exporter profits and stock markets while raising import costs for oil, food, and energy, which is adding to consumer price pressure and political risk for the government.
- Analysts say structural limits such as Japan’s large public debt, an aging population, and the huge size of global currency markets make sustained appreciation hard to achieve and mean further policy moves or more interventions are likely to only cap declines rather than reverse the trend.