Given the depreciation of the yen's role in driving up import prices and household expenses, this has become a growing concern for the country's policymakers. Market concerns intensified in late April, when the yen fell to a low since July 2024. The Japanese authorities immediately took action and used nearly 74 billion US dollars to support the yen. The intervention was the largest in a single month, triggering a strong rebound in the yen. However, this effect did not last long. On July 21, the yen hit a new low since 1986 against the US dollar, highlighting the limitations of intervention measures in the absence of a broader shift in monetary policy. A policy shift may be in the works. Bank of Japan officials are open to choosing a faster pace of interest rate hikes than economists generally expect, as the continued weakness of the yen increases the risk of rising inflation, according to people familiar with the matter.

Given the depreciation of the yen's role in driving up import prices and household expenses, this has become a growing concern for the country's policymakers. Market concerns intensified in late April, when the yen fell to a low since July 2024. The Japanese authorities immediately took action and used nearly 74 billion US dollars to support the yen. The intervention was the largest in a single month, triggering a strong rebound in the yen. However, this effect did not last long. On July 21, the yen hit a new low since 1986 against the US dollar, highlighting the limitations of intervention measures in the absence of a broader shift in monetary policy. A policy shift may be in the works. Bank of Japan officials are open to choosing a faster pace of interest rate hikes than economists generally expect, as the continued weakness of the yen increases the risk of rising inflation, according to people familiar with the matter.