Yen’s wild ride: Ups, downs, and Bank of Japan interventions
The Japanese yen has been under pressure due to wide U.S.-Japan interest rate differentials, prompting several rounds of intervention by Tokyo to prop up the currency. The yen's downtrend has reversed in recent days following the Bank of Japan's July 31 decision to raise interest rates.
The Japanese yen has been under pressure in recent years due to the wide U.S.-Japan interest rate differentials. It lost over 20% against the dollar since 2022, prompting intervention by Tokyo. The yen touched a 38-year low of 161.96 to the dollar on July 3. Japan is suspected to have intervened again in mid-July. The Bank of Japan's July 31 decision to raise interest rates triggered an unwinding of the carry trade, causing the yen to rebound sharply against the dollar. The BOJ raised its short-term policy rate to 0.25% from 0-0.1% in July, and Governor Kazuo Ueda signaled the possibility of further rate hikes if Japan meets its 2% inflation target.
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