The yen dropped to its weakest level since the 1990s after a widening gap between Japanese and US interest rates. The move came as the Bank of Japan increased its policy rate from 0.25 percent to 0.5 percent, a shift that Bloomberg reported citing sources close to the matter.
This marks the first tightening of monetary policy in 17 years, contrasting with the Federal Reserve, which has raised rates more aggressively to 5.25 percent. Market participants anticipate that the policy divergence between Tokyo and Washington will persist, shaping currency and interest rate dynamics for months to come.
Following an emergency meeting that brought together officials from the Ministry of Finance, the Bank of Japan, and the financial market regulator, authorities described the yen’s sharp slide as having speculative drivers. Finance Minister Shunichi Suzuki cautioned that Tokyo was weighing every option to shield the currency from further weakness.
The government noted the possibility of intervention in the foreign exchange market to stabilize the yen for the first time since 1998, signaling a willingness to use reserves if necessary to defend the currency’s value.
Across Asian trading sessions, the currency touched a multi-decade low, with the yen testing the upper end of its trading band at levels around 151.94 per dollar in some listings. This notable move underscores the pressures on Japan’s balance sheet and the broader impact on trade costs, import prices, and investor sentiment.
Observers have noted a shift in regional currency arrangements and costly implications for contracts linked to the Chinese market, where yen exposure has been a factor amid evolving financial ties. The moment reflects broader strategic considerations as global markets reassess currency risk, intervention options, and the path toward normalization after a long period of ultra-easy policy in both major economies.