Japan Signals Intervention as Yen Hits 40-Year Low

By Staff, Agencies

Japan warned on Tuesday that it is prepared to intervene in currency markets after the yen fell to its weakest level against the US dollar in four decades, raising concerns over higher import costs and growing pressure on households.

In response, Finance Minister Satsuki Katayama said authorities were closely monitoring exchange-rate movements and stood ready to act if necessary.

At the same time, she reiterated that Japan “will take appropriate action at any time as necessary,” according to local media.

On the markets, the warning came after the yen fell past 161.96 against the dollar in London trading on Monday, its weakest level since 1986, before briefly touching around 162.40 in Asian trade on Tuesday and recovering slightly to 162.17.

Meanwhile, the yen’s prolonged weakness—driven by interest rate gaps between the US and Japan and war-related uncertainty—is pushing up import costs, particularly for energy.

As a result, higher oil prices are fueling inflation, prompting government subsidies, though continued depreciation risks further strain on households.

In parallel, Japan has signaled possible renewed intervention after spending more than $70 billion previously to slow the yen’s decline, although effectiveness remains limited while the US–Japan rate gap persists.

At the same time, the weaker yen has boosted tourism by making Japan cheaper for foreign visitors, while also supporting exporters through improved competitiveness and higher repatriated earnings.

Finally, the Bank of Japan has raised rates to a 31-year high, but markets still expect a wide gap with the US, especially if the Federal Reserve tightens further, while further hikes may face political resistance over growth concerns.