MARKET NEWS

Investing.com -- The Japanese yen dropped to its lowest level against the U.S. dollar since 1986 on Monday, falling as much as 0.1% to 161.96 per dollar. The currency broke past the 161.95 level last reached in July 2024, when Japanese authorities intervened to support the exchange rate.

The yen's decline comes despite recent efforts by Japan's central bank to tighten monetary policy. The Bank of Japan raised its benchmark interest rate to 1% on June 16, marking the highest level since 1995. The move had little effect on the currency's trajectory as traders anticipate the Federal Reserve will maintain a hawkish stance.

Japanese Finance Minister Satsuki Katayama stated on June 19 that authorities remain prepared to take "bold action" against excessive speculative moves in the foreign exchange market. Katayama said the U.S. and Japan are increasingly "aligned" on foreign exchange policy following her meeting with U.S. Treasury Secretary Scott Bessent, and that both countries agreed to take "bold steps" on currencies if necessary.

Japan previously spent a record 11.73 trillion yen, or $72.5 billion, intervening in currency markets between April 28 and May 27 after the yen first dropped past 160 per dollar. The government likely used its holdings of foreign securities, including U.S. Treasuries, to finance the currency defense, according to Finance Ministry reserve data.

The weak yen is increasing profits for Japanese exporters and supporting the nation's stock market. Import costs are rising for oil and gas shipments priced in dollars, leading to higher consumer prices for food and electricity.

The Japanese government plans to call for "appropriate" monetary management in its basic policy guidelines, which market participants view as an attempt to discourage the Bank of Japan from additional interest rate increases.