Yen Hovers Near Four-Decade Low, Keeping Intervention on the Table

The Japanese yen has hovered near its weakest level against the US dollar in roughly four decades, with the dollar recently trading around 162 yen, intensifying speculation that Japanese authorities could intervene to stem the currency's slide. The yen's weakness has been driven in part by a widening gap between US and Japanese interest rates, which was reinforced after the Federal Reserve struck a hawkish tone and markets began pricing in the possibility of further US rate increases. A weaker yen boosts the competitiveness of Japanese exporters but raises the cost of imported energy and food, adding to domestic inflation pressures. The Bank of Japan has been gradually normalising policy, having lifted its benchmark rate to 1%, and firmer business sentiment and inflation expectations have strengthened the case for further tightening. Even so, the pace of monetary adjustment has lagged the currency's move, keeping pressure on policymakers. Traders remain alert to the risk of official action, with any intervention likely aimed at smoothing volatility rather than reversing the broader trend.