Japanese Yen Slumps to 34-Year Low Against Dollar—Intervention Risk Rises
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The Japanese yen (JPY) has dropped to its lowest level since 1990 against the U.S. dollar (USD), breaching the key 160 per dollar mark and reigniting concerns over potential government intervention. This dramatic depreciation highlights the growing gap between ultra-loose monetary policy in Japan and the hawkish stance of the U.S. Federal Reserve.
The move comes despite repeated warnings from Japanese officials that they will not hesitate to take action to stabilize the currency. However, verbal intervention has so far failed to halt the yen’s slide, as traders continue to test the authorities’ resolve.
At the core of the issue is the Bank of Japan’s (BoJ) continued commitment to negative interest rates and yield curve control, in contrast to the Fed’s aggressive rate hikes. While Japan’s economy has seen modest recovery and inflation has ticked up, the BoJ insists that it is still too early to tighten policy.
“The yen’s weakness reflects deep structural differences in monetary policy between Japan and the U.S.,” said Hiroshi Nami, FX analyst at Nomura Securities. “Until the BoJ signals a shift, the currency will remain under pressure.”
In recent weeks, the yen has lost over 5% against the dollar, triggering a wave of imported inflation and raising concerns for Japanese consumers and businesses. Japan’s Finance Minister Shunichi Suzuki said the government is closely watching the markets with a sense of urgency, hinting at possible direct currency intervention.
Such intervention is not without precedent. In October 2022, the Japanese government spent over $40 billion to prop up the yen after it fell past 150. While the move temporarily halted the decline, the effects were short-lived. Analysts caution that a similar intervention today would need to be even larger—and coordinated with other central banks—to be truly effective.
The weak yen is a double-edged sword for Japan. On one hand, it boosts exports by making Japanese goods cheaper abroad. On the other hand, it raises the cost of imports, especially energy and food, straining household budgets and fueling public discontent.
Meanwhile, technical indicators suggest the yen is deeply oversold, with many traders anticipating a sharp reversal if intervention does occur. “We’re now at levels where the risk of sudden volatility is high,” noted Jane Foley, Head of FX Strategy at Rabobank.
Looking ahead, all eyes are on both Tokyo and Washington. The BoJ’s next policy meeting will be critical, and any change in tone could spark a major shift in the yen’s direction. Until then, markets remain on edge, waiting to see if Japan will step in to defend its currency—or let it fall even further.
