Yen Hits 40-Year Low vs Dollar; Intervention Looms
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- Japanese yen fell to 162.77 per dollar in Asia on Wednesday, the weakest intraday level against the greenback since 1986, as the BOJ's gradual rate-hike pace and prospects for further Fed tightening pressured the currency lower.
- Finance Minister Satsuki Katayama on Tuesday renewed her pledge to address excessive yen volatility, saying Japan 'will take appropriate action on currencies at any time as needed' and confirming with U.S. counterparts that 'decisive steps' remain an option.
- Japan's Ministry of Finance spent a record 11.73 trillion yen (~$72.47 billion) on intervention between April 28 and May 27, but the relief proved temporary as yen selling resumed with the return of risk appetite amid easing Middle East tensions.
- Japan's foreign-exchange reserves stood at $1.09 trillion, split between $162 billion in deposits and $932 billion in securities, giving the MoF plenty of firepower for another round of intervention per Wells Fargo's Chidu Narayanan.
- Analysts at HSBC, National Australia Bank, and Wells Fargo all expect the MoF to step in again, with HSBC's Joey Chew and Paul Mackel writing that USD/JPY 'has moved into a new and higher range' and that 'we still think MoF will intervene at some point.'
Why it matters: Japan already burned through a record ~$72 billion in April–May intervention and watched the yen resume its slide; with the currency now at its weakest since 1986 and rate-spread pressure still intact, MoF credibility is on the line if it doesn't act again — and its $162 billion in deposit reserves give it the ammunition to try.
