Japanese Yen Falls to Lowest Level Against US Dollar Since 1986

The yen’s fall seems unstoppable, and on June 26 it fell to its lowest level against the dollar since 1986. Japan’s currency fell 0.6% to 160.62 per dollar, surpassing levels that led the Japanese central bank to intervene in the market in April 2024. The currency has lost more than 12% in 2024, with serious consequences for the economy, from rising import prices hurting consumers to uncertainty in the business world.

On June 27, the yen held at 160.52 per dollar, and Japanese authorities announced the necessary measures, Finance Minister Shunichi Suzuki said. “It is desirable that exchange rates move steadily. Rapid one-way movements are undesirable. In particular, we are very concerned about the impact on the economy,” Suzuki explained, according to Reuters. “We are watching these moves with great attention, analyzing the factors underlying these moves, and will take the necessary action.”

The “adequate measures,” not yet quantified to avoid excessive currency fluctuations, were also announced by Cabinet Secretary Yoshimasa Hayashi.

It is the large gap between interest rates in Japan (near zero) and interest rates in the USA (between 5.25 and 5.5%) that will keep high pressure on the yen. While the Bank of Japan does not seem intent on raising rates, some analysts say pressure on the bank may force it to consider a rate hike at its next meeting in late July.