Japanese Yen Hits 40-Year Low Despite Rate Hikes

The Japanese yen fell to its weakest level against the U.S. dollar since July 2024, trading around 161.205 per dollar on June 19, 2026. The decline is driven by a persistent interest-rate gap between Japan and the United States, intensified by a hawkish policy shift from Federal Reserve Chair Kevin Warsh, which increased expectations for further monetary tightening in July.

To combat the slide, the Bank of Japan raised its benchmark interest rate to 1%, a 31-year high. Despite this and a record 11.7 trillion yen spent on interventions between April 28 and May 27, the currency remains under pressure. Investor confidence has further declined due to concerns over Prime Minister Sanae Takaichi's fiscal spending plans.

Japanese authorities, including Finance Minister Satsuki Katayama and Chief Cabinet Secretary Minoru Kihara, have signaled readiness to intervene again to defend the 161.95 level and curb excessive volatility. While core inflation remained below the 2% target in May, Deputy Governor Ryozo Himino stated the central bank will continue raising rates to prevent inflation overshooting.