The Japanese yen weakened against a basket of major and minor currencies during Asian trading on Tuesday, extending its losses for a second consecutive session against the US dollar and falling to its lowest level since 1986. The move has fueled speculation that Japanese authorities may intervene in the foreign exchange market to defend the currency against excessive volatility.

Finance Minister Satsuki Katayama said the government remains prepared to take appropriate action against excessive exchange-rate fluctuations. Meanwhile, Chief Cabinet Secretary Minoru Kihara stated that Japan would continue efforts to build an economy that is less vulnerable to currency swings.

The Price

USD/JPY rose 0.3% to 162.40, its highest level since December 1986, up from an opening level of 161.93. The pair touched an intraday low of 161.85.

The yen ended Monday down 0.15% against the US dollar, marking its fifth loss in the last six sessions, as concerns over the widening interest-rate gap between Japan and the United States continued to weigh on the currency.

Monthly performance

For June, which concludes officially at todays settlement, the Japanese yen is down around 2.0% against the US dollar and is on track for a second consecutive monthly decline, as well as its largest monthly loss since October 2025.

The monthly weakness reflects strong investor demand for the US dollar following the hawkish Federal Reserve meeting under its new chairman, Kevin Warsh.

Rising expectations for additional Federal Reserve rate hikes this year have renewed concerns about the widening yield differential between the United States and Japan in favor of the dollar.

Japanese authorities

Japanese Finance Minister Satsuki Katayama said on Tuesday that the government stands ready to take appropriate measures against excessive currency volatility.

That includes decisive action, as agreed between Japan and the United States, Katayama said.

Chief Cabinet Secretary Minoru Kihara also told reporters that the government would continue efforts to reduce the economys exposure to exchange-rate fluctuations while remaining ready to intervene in currency markets when necessary. He declined to comment directly on the current level of the yen.

Views and analysis

Julia Wang, Chief Investment Officer for North Asia at Nomura, said Japan could intervene in the foreign exchange market following the yens slide to multi-decade lows, although she expects any broader market impact to be short-lived.

Wang added that while intervention is not officially tied to any specific exchange-rate level, a new cycle low for the yen could increase domestic concerns about currency weakness and raise the likelihood of official action.

She noted that the broader outlook for the yen remains weak because large interest-rate and real-yield differentials between Japan and the United States continue to favor carry trades, where investors borrow cheaply in yen and invest in higher-yielding assets elsewhere.

Matt Simpson, Senior Market Analyst at StoneX, said Japans Ministry of Finance would intervene if it could, but it faces a difficult challenge while moving against the tide of a hawkish Federal Reserve.

Simpson added that if US economic data delivers a surprise in favor of monetary easing later this week, Japanese authorities could seize the opportunity to intervene more aggressively while the dollar is under pressure. Until then, intervention threats are likely to remain largely verbal.

Japanese interest rates

Market pricing for a 25-basis-point rate increase by the Bank of Japan at its July meeting remains below 25%.

Investors are awaiting additional inflation, labor market, and wage data from Japan that could force a reassessment of those expectations.