Yen Volatility Raises Fresh Fears of Japanese Currency Intervention

Japan’s yen weakened on Monday after a sharp decline last week increased speculation that authorities could intervene to support the currency.

The yen traded around 156.64 per US dollar, after losing about 2% last week. Japanese markets were closed for a three-day holiday, contributing to thin trading and heightened sensitivity to currency movements.

The Bank of Japan raised its policy rate to 1.25%, its highest level in 31 years, but the decision failed to strengthen the yen. Two policymakers opposed the move, while the bank offered limited signals about further tightening.

Reports that Japanese officials had conducted so-called rate checks — asking banks for currency quotations to assess market conditions — further fuelled expectations of possible intervention.

Meanwhile, the US dollar remained firm after the Federal Reserve raised interest rates and signalled that additional increases could be considered. Traders are currently pricing a 55% chance of another US rate increase in October.

The developments have kept global currency markets focused on central-bank policy and inflation risks.