The yen falls to a 40-year low, testing the credibility of Japan's policies

Bitget

News

智通财经2026/07/23 03:41

Show original

Bitget offers one-stop trading for cryptocurrencies, stocks, and gold. Trade now!

A welcome pack worth 6200 USDT for new users! Sign up now!

The US dollar recently broke through the 163 threshold against the yen, marking the first time since 1986. The fundamental reason for the yen’s weakness lies in the strengthening dollar—a second wave of global energy shocks has reignited inflation concerns, driving up yields on US Treasuries, and most major currencies have depreciated against the dollar. However, Japan is especially vulnerable because about 90% of its energy is imported, with 95% coming from the Middle East.
What worries the market even more is that despite a 45% plunge in international oil prices in May and June, the yen failed to gain any boost. Policy measures from Tokyo that appeared beneficial for the yen—such as encouraging pension funds to invest in domestic financial assets—have failed to reverse the yen’s decline. Since 2022, Japan’s Ministry of Finance has repeatedly intervened in the currency market, spending about $215 billion in total. However, this has only bought time and failed to achieve a lasting recovery for the yen.
Japan seems to be caught in a policy dilemma: its fiscal policy is overly loose, monetary tightening is insufficient, and the close relationship between fiscal and monetary authorities is intensifying concerns over the Bank of Japan's independence. The Sanae Takaichi government has yet to clarify how it will raise funds for a 370 trillion yen public-private investment plan. Such worries have pushed 10-year government bond yields up to a 30-year high at 2.90%.
Although the Bank of Japan has raised its policy rate to a 31-year high of 1%, it's still low compared to other G10 countries, and real rates remain deeply negative. The yield spread between US and Japanese two-year government bonds has widened to 285 basis points, partly because the market expects the Federal Reserve to hike rates twice before Q1 next year. A senior fellow at the Brookings Institution pointed out that if not for the Bank of Japan's ongoing bond purchases, yields on Japanese government bonds might have already risen into double digits.
Tokyo seems to lack the political willingness to fundamentally solve the problem. The effectiveness of interventions is diminishing, indicating the market is signaling that something must change. While recent escalation in US-Iran tensions has pushed oil prices higher and the US-Japan yield spread has expanded, intensifying pressure on the yen, ultimately the fate of the yen remains in Tokyo’s hands, and investors are running out of patience with Japanese policymakers.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

Understand the market, then trade.

Bitget offers one-stop trading for cryptocurrencies, stocks, and gold.

Trade now！

The yen falls to a 40-year low, testing the credibility of Japan's policies

You may also like

Crypto prices