The Japanese economy is unique in the world, but for decades it has been stagnant, a period popularly known as the ‘lost decades’, during which growth has been non-existent. This has caused the yen to gradually lose value year-after-year against the dollar, and that depreciation is now being exacerbated by the crisis in the Strait of Hormuz, Iran, and the United States.
According to Reuters, the Bank of Japan is reported to have intervened by purchasing yen worth $32 billion (around 5 trillion yen). The serious implication is that this would be the second major intervention in less than a week. The Japanese stock market is currently closed for a public holiday, and it is possible that this intervention has been carried out gradually over several trading sessions.
Japan’s most recent intervention, which was officially confirmed, took place in July 2024, when it spent some $36.8 billion to prop up the yen after it fell to its lowest level in 38 years, standing at 161.96 to the dollar. Today it is trading at 156.26 yen to the dollar.
A sharp, unchecked fall in the currency could trigger a financial crisis that would completely destabilise the country’s already fragile financial structure.
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AloJapan.com