Yen Approaches 39-Year Low, Japan Threatens Intervention

Japanese Finance Minister Satsuki Katayama stressed that the government was ready to take firm action if there were speculative movements in the foreign exchange market amid the weakening of the yen against the US dollar. (Photo: Kyodo News)

Japan has again sent a warning to the foreign exchange market. Finance Minister Satsuki Katayama confirmed that the government is ready to take firm action if it finds speculative movements that trigger the weakening of the yen.

The statement comes as the yen weakened to a high of 161 per dollar, near a record low in more than 39 years.

According to a Kyodo News report quoted on Friday, June 19, Katayama confirmed that the Japanese government's stance had not changed even though pressure on its currency continued.

"There is no change at all in our stance to take firm action," Katayama told reporters on Friday.

The statement sparked speculation that Japanese authorities could again intervene in the foreign exchange market to hold back the yen's weakening. Intervention is a government or central bank measure to enter the market by buying or selling currencies to influence exchange rate movements.

The yen fell to 161.81 per dollar in overnight trading in New York. That was the weakest level since July 2024. But historically, the yen's position in the upper 161 per dollar range is also close to the lowest level in more than 39 years.

The weakening of the yen occurred after the US dollar strengthened. Investors flocked to the US currency after the Federal Reserve signaled it was ready to raise interest rates in the next year due to inflation concerns.

For Japan, a weakening yen is not good news. The country is highly dependent on energy imports due to a lack of natural resources. When the yen weakens, the cost of energy imports also increases and has the potential to add to the burden on households and businesses.

Kyodo News quoted Japanese Ministry of Finance data showing that authorities had spent a record 11.73 trillion yen, or about 73 billion US dollars, on foreign exchange market interventions during the period from April 28 to May 27.

The move helped the yen strengthen to around 155 per dollar. However, the strengthening did not last long after the dollar was again hunted by investors as a safe asset amid the Middle East conflict.

This situation makes the market continue to pay attention to the next steps of the Japanese authorities. On the one hand, the government wants to hold back the weakening of the yen. On the other hand, each intervention requires a lot of funds, while the pressure from the strengthening of the US dollar has not yet eased.