The Japanese yen has fallen to approximately 161.98 against the US dollar, breaching the prior floor of 161.95 set in July 2024 and hitting its weakest point in roughly four decades. The move reflects a persistent gap between US interest rates, which remain elevated, and Japan's ultra-loose monetary policy stance. The yen has now depreciated past a psychologically significant threshold that previously prompted intervention warnings from Japanese authorities.
A yen at 40-year lows puts Japanese exporters in a complicated spot — cheaper yen boosts their overseas earnings when converted back to yen, lifting stocks like Toyota, but it also signals a currency crisis risk that could force the Bank of Japan to act. For global portfolios, a disorderly yen move can trigger unwinding of the carry trade — a strategy where investors borrow cheap yen to fund bets in higher-yielding assets — which can cause sudden, broad selloffs across equities, emerging markets, and crypto.
Bank of Japan next policy meeting: late July. Japanese government/Ministry of Finance intervention statements: watch daily. US PCE inflation data: late July. Next Federal Reserve meeting: July 29-30.
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