Japanese authorities struggle to intervene in the market, unable to reverse the falling trend; the yen hits a 40-year low at one point.

Given the role played by the depreciation of the yen in pushing up import prices and household expenses, this has become an increasingly concerning issue for policymakers in the country. Market concerns intensified in late April when the yen fell to its lowest level since July 2024. Japanese authorities then intervened, using nearly $74 billion to support the yen, marking the largest intervention in a single month and leading to a strong rebound of the yen. However, this effect was not sustainable. On July 21st, the yen hit a new low against the dollar since 1986, highlighting the limitations of intervention measures in the absence of a broader change in monetary policy. A policy shift may be in the works. According to sources, due to the continued weakness of the yen intensifying the risk of rising inflation, officials at the Bank of Japan are open to a faster pace of rate hikes than economists generally expect.