Japanese Finance Minister Shunichi Katayama warned of decisive measures against speculative trading after the yen fell to about ¥161.8 per U.S. dollar [1].

The currency's decline threatens economic stability by increasing the cost of imports and signaling a widening gap between Japanese and U.S. monetary policies. A sustained weakness in the yen can fuel inflation within Japan, putting pressure on the government to intervene in the foreign-exchange market.

The currency hit ¥161.81 per U.S. dollar on June 19 [1]. This level marks the lowest point for the yen since 1986, a span of approximately 39 years [1]. The drop surpassed a previous low of ¥161.95 set in July 2024 [1].

Katayama said that if there are speculative moves, the government will take decisive measures [1]. This follows a pattern of verbal warnings intended to deter traders from betting against the currency.

Market analysts suggest the decline is driven by expectations of continued U.S. rate hikes and a strong U.S. economy. Kikuchi Kiyoshi of Tokyo Marine Asset Management said that the dollar is strong because the U.S. economy is strong, adding that there may be little the Japanese government can do against the dollar's independent rise [1].

Japan has previously taken aggressive action to stabilize the currency. In April 2024, the government and the Bank of Japan conducted interventions totaling over ¥11 trillion [1].

Earlier this month, the yen was reported at lower levels, with figures ranging from ¥159.60 to ¥160 per U.S. dollar [2, 3, 4]. The recent slide to ¥161.81 represents a sharp acceleration of the downward trend observed throughout June.

“The yen fell to about ¥161.8 per U.S. dollar, a level not seen since 1986.”

The yen's descent to a 39-year low underscores the volatility created by the divergence between the U.S. Federal Reserve's hawkish interest rate stance and Japan's more accommodative policy. While a weak yen benefits exporters, the resulting surge in import costs for energy and food creates domestic economic strain. The Finance Minister's threat of 'decisive measures' suggests that Japan may once again deploy its massive foreign exchange reserves to prevent a currency collapse that could destabilize the broader Asian financial market.