Japanese Yen Falls to Four-Decade Low as Tokyo Signals Decisive Action

The Japanese yen slid to its weakest level since 1986, putting Tokyo back under pressure to defend the currency. 

The currency has declined more than 2% this quarter. The latest drop marks its fourth consecutive quarterly loss, the longest losing streak since 2022, when the currency weakened for seven straight quarters.

Tokyo Signals Readiness to Act

On Tuesday, the yen touched an intraday low of 162.4 per dollar. At press time, it stood at 162.1. 

Meanwhile, Finance Minister Satsuki Katayama said authorities stood ready to respond to currency moves at any time. 

“This includes taking decisive action, as confirmed between Japan and the US,” she said 

Chief Cabinet Secretary Minoru Kihara said the government would work to build an economy less exposed to foreign-exchange swings while remaining prepared to intervene if needed.

Japan has already spent heavily to slow the decline. Authorities deployed a record 11.7 trillion yen, or $72.25 billion, between late April and late May. The yen still resumed its fall once that support faded.

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🚨 WE ARE GETTING DANGEROUSLY CLOSE TO ANOTHER YEN INTERVENTION.The Japanese yen just hit its weakest level against the US dollar in 40 years, with USD/JPY trading at 161.96.This matters because the Bank of Japan can't let the yen stay this weak.A weak yen feeds directly… pic.twitter.com/JFmNXZVdgr

— Bull Theory (@BullTheoryio) June 29, 2026

The Bank of Japan has also continued tightening monetary policy. It recently raised its benchmark interest rate to 1%, following a December hike to 0.75%.

Still, strategists doubt that intervention alone can reverse the trend. Carol Kong, currency strategist at Commonwealth Bank of Australia, called intervention a question of when, not if.

“However, any intervention is unlikely to reverse the broader uptrend in USD/JPY. We forecast USD/JPY to keep rising to 164 by early 2027,” she said.

Fed Outlook Adds Pressure

Higher US rate expectations have further undercut the yen. Traders now price a 63.1% chance of a Federal Reserve rate hike by September after three months of stronger-than-expected payroll gains.

Attention is now turning to Thursday’s US employment data for June. A Reuters survey projects 110,000 new jobs for the month.

A strong print would reinforce bets on a Fed rate hike, widening the yield gap that has driven the yen lower. A weaker number could hand Tokyo a softer dollar to lean on if it chooses to step in.

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