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TOKYO — In a dramatic show of financial firepower, Japan has unleashed more than ¥10 trillion (US$64 billion) in just over a week to defend its currency, the yen, from a steep slide against the U.S. dollar.
The scale of intervention one of the largest in modern history underscores Tokyo’s determination to prevent a freefall that could destabilize its economy and ripple across global markets.
The yen had tumbled to nearly ¥160 per dollar, its weakest level in almost two years, before authorities stepped in.
By Thursday, the currency had clawed back to around ¥157, a modest recovery but still far from the comfort zone Japanese policymakers seek.
A Currency Under Siege
The yen’s weakness is not new. For months, traders have bet against it, citing the yawning gap between U.S.
interest rates still elevated as the Federal Reserve battles inflation and Japan’s near-zero borrowing costs.
That divergence has fueled capital outflows, making the yen a target for speculative selling.
Compounding the pressure is the surge in global oil prices, driven by the conflict in Iran.
As one of the world’s largest energy importers, Japan faces ballooning costs, further straining its currency.
Tokyo’s Reluctant Intervention
Japanese officials have long been wary of direct market intervention, preferring to let fundamentals dictate exchange rates. But the sheer speed of the yen’s decline left them little choice.
Since April 30, the Ministry of Finance has deployed staggering sums to buy yen and sell dollars, hoping to restore confidence.
Vice Finance Minister Atsushi Mimura declined to confirm the exact figures, reflecting Tokyo’s cautious communication strategy.
Yet market participants estimate the interventions at ¥10 trillion, dwarfing the ¥5.5 trillion spent in July 2024 when the yen neared ¥162.
The battle over the yen is not confined to Tokyo. Next week, U.S. Treasury Secretary Scott Bessent is scheduled to visit Japan for talks on currency stability.
His trip will precede a high-profile meeting in China alongside President Trump, highlighting how Japan’s monetary defense is intertwined with broader geopolitical currents.
For Washington, Japan’s moves raise delicate questions. While the U.S. has historically tolerated allies defending their currencies, large-scale interventions can spark tensions if they are seen as distorting trade balances.
Japan’s struggle resonates across Asia. The Indonesian rupiah, South Korean won, and other regional currencies have also come under pressure, reflecting the dominance of U.S. monetary policy and the vulnerability of energy-importing economies.
Investors are watching closely. “This is not just about Japan,” said one Tokyo-based analyst. “It’s about whether governments can still credibly defend their currencies in a world of massive capital flows.”
For now, Tokyo’s actions have bought time. But the question remains: how long can Japan sustain such interventions? Foreign reserves are vast, yet repeated spending of tens of billions risks draining resources and inviting skepticism from markets.
Economists warn that unless Japan narrows its interest rate gap with the U.S., interventions may only provide temporary relief. “You can fight the tide for a while,” said another analyst, “but eventually fundamentals win.”
Japan’s defense of the yen is a high-stakes gamble a test of whether traditional currency interventions can still succeed in an era of globalized finance.
For now, Tokyo has signaled it will fight “whatever it takes.” But the markets, as ever, will decide how long that fight can last”.
