Yen Slides Toward 40-Year Low as Markets See BOJ Behind the Curve

The Japanese yen slid toward 162.5 against the US dollar this week, hovering near its weakest level in about four decades, as investors saw little indication that Tokyo was ready to act decisively to support the currency. Markets increasingly view the Bank of Japan as falling behind the curve, even after it raised its benchmark policy rate to 1 percent in June, the highest since 1995. Persistent yen weakness has continued despite that move, driven by a wide interest-rate gap with other economies, carry trades and hedging flows, and a recent climb in oil prices tied to renewed Middle East tensions, which weigh heavily on energy-importing Japan. Adding to the pressure, reports suggested Japanese authorities have no immediate plans to alter the asset allocation of state pension funds, dimming hopes of near-term support for domestic markets. Long-term Japanese government bond yields have climbed to levels last seen decades ago amid fiscal concerns and the broader global repricing of debt. Investors are now awaiting official intervention data due later in the month to judge whether authorities were behind brief, sharp yen rallies seen recently. A weaker yen raises import costs for households while flattering exporters' earnings.