The Japanese yen rose in Asian trading on Monday at the start of the week against a basket of major and minor currencies, as it attempts to recover from a 20-month low against the US dollar, supported by notable buying activity from lower levels.

The yen climbed back above the key 160 yen threshold, amid close monitoring by Japanese authorities, as the top currency official issued a strong warning over excessive movements, affirming the governments readiness to intervene in the foreign exchange market to support the domestic currency.

Meanwhile, Bank of Japan Governor Kazuo Ueda warned about the implications of a weaker domestic currency and its negative impact on the economy and price levels, noting that continued yen depreciation could increase inflationary pressures, while signaling the possibility of raising interest rates in the coming period if conditions warrant.

Price Overview

Japanese yen exchange rate today: the US dollar fell 0.35% against the yen to 159.66, down from the session opening level of 160.25, after reaching a high of 160.46, the highest level since July 2024.

The yen ended Fridays session down 0.3% against the dollar, marking its fourth consecutive daily loss, due to fading hopes for a ceasefire in the Middle East.

The yen declined 0.65% against the dollar last week, recording its fifth weekly loss in the past six weeks, as investors focused on buying the US currency as a preferred safe-haven asset following the outbreak of the Iran war.

Japanese authorities

In the strongest warning yet of intervention to support the yen, Japans top currency official Atsuki Mimura said on Monday that authorities may need to take decisive steps if speculation in the currency market continues.

Mimura told reporters that speculation is increasing in the currency market, in addition to the crude oil futures market, and if this situation persists, it may be time to take decisive action.

160 yen threshold

The US dollar rose against the yen on Friday, reaching 160 for the first time since July 2024, when Japanese authorities last intervened to support the currency.

Authorities in Tokyo have repeatedly warned of the possibility of intervention to support the yen if its value declines excessively. Their last intervention was in July 2024, when the exchange rate reached around 161 per dollar, the lowest level since the 1980s.

Kazuo Ueda

Bank of Japan Governor Kazuo Ueda said before parliament on Monday that currency market movements are clearly among the factors that significantly affect economic developments and price levels.

Ueda added that the Bank will conduct monetary policy appropriately by closely examining how currency movements affect the likelihood of achieving its growth and price outlook, as well as associated risks.

He also said that the Bank of Japan should raise short-term interest rates at an appropriate pace to avoid excessive increases in bond yields, indicating his intention to continue raising interest rates steadily.

Japanese interest rates

Following the above comments, markets increased pricing for the probability of a quarter-point rate hike by the Bank of Japan at the April meeting from 15% to 25%.

To reassess these expectations, investors are awaiting further data on inflation, unemployment, and wages in Japan.