Yen plunges to a 40-year low and pressures global markets

The Japanese yen reached its lowest level in four decades against the dollar, drawing greater attention from global markets and raising expectations about a possible intervention by the Japanese government in the foreign exchange market.

The currency was traded at 162,27 per dollar at the start of the Asian session, renewing lows not seen since 1986. The move reinforces pressure on the Japanese economy and raises concerns about exchange rate stability in an environment of high interest rates in the United States.

Japan’s Finance Minister, Satsuki Katayama, stated that the government is prepared to act in the face of excessive fluctuations. “This includes taking decisive measures, as confirmed between Japan and the US,” she said.

Meanwhile, Chief Cabinet Secretary Minoru Kihara highlighted that the country continues working to reduce its vulnerability to exchange rate volatility, without ruling out direct interventions in the market. Even so, he avoided commenting on specific currency levels.

In the view of Julia Wang, Nomura’s chief investment officer for North Asia, the recent decline may increase the likelihood of official action. According to her, although there is no fixed level that determines intervention, the renewal of historical lows tends to increase internal pressure.

“Intervention should not depend on a specific level. It depends on the nature of the exchange rate fluctuation, the nature of the dollar-yen pair... This is a cycle peak; it is a new cycle peak. It is probably a sensitive level, which will rekindle some of the anxiety regarding the currency’s depreciation in the domestic market,” said Wang.

Even so, the specialist believes that any action would have a limited effect in the long term, given the wide interest rate differentials between Japan and the United States, which continue to encourage carry trade operations.

The Bank of Japan recently raised its benchmark rate to 1%, the highest level in more than 30 years, continuing the monetary normalization process started in 2024. Even with the gradual tightening, the policy remains far from the interest rate level seen in the US economy.

This mismatch keeps pressure on the yen and influences global capital flows, with indirect effects also on assets such as Bitcoin and other cryptocurrencies, which tend to react to changes in risk appetite and the strength of the dollar.