The Yen’s Turbulent Year and Japan’s Fight to Stabilize It

The yen has been under sustained pressure over the past year, prompting Japan to enter the foreign exchange market to defend the currency. The benefits of this recent intervention are already waning, raising the question of whether officials in Tokyo will have to wade back into the market.

While the government has declined to confirm the intervention, people familiar with the matter say it started on April 30. Analysis of the Bank of Japan’s accounts indicates it continued into early May and likely cost as much as ¥10 trillion ($63 billion).

One big part of the yen’s continued weakness is attributed to the wide gap between Japan’s low interest rates and the higher return on money that investors can get in economies like the US. The gap has narrowed a tad over the past year with rate cuts by the Federal Reserve, but the BOJ has been slow to hike rates in Japan despite the return of inflation.

Other causes of the weakness in the yen have come from global shocks and political upheaval at home. The currency has been in a broad depreciation trend since around April 2025, when President Donald Trump shook the world economy with a barrage of tariff announcements. Political ructions in Japan then took a toll as Shigeru Ishiba lost his grip on power and Sanae Takaichi became prime minister, renewing investor concern over government spending. On top of all this has come the conflict in the Middle East, which has highlighted Japan’s vulnerability to energy imports while adding pressure on the currency.

Here’s a closer look at the yen’s swings over the past year:

148.9

149.5

150.8

151.9

152.7

153.1

154.1

155.3

157.2

157.2

158.1

159.1

160.3

149.17

BOJ holds rates, slows bond tapering

The BOJ outlines a slower reduction in bond buying after volatility in super-long JGBs.

LDP-Komeito loses upper house majority

Shigeru Ishiba’s ruling coalition faces growing political uncertainty and a weakened mandate, weighing on Japanese assets.

BOJ stays on hold

The BOJ unanimously keeps rates at 0.5% as officials assess tariff risks and the economic outlook.

LDP revolt against Ishiba intensifies

Several key LDP members signal their intention to resign, adding pressure on Ishiba to step aside.

Ishiba announces resignation

Ishiba says he’ll resign as LDP president, leaving markets uncertain over who will succeed him and how policy will change.

Fed cuts rates; BOJ stays on hold

The Fed’s rate cut offers little relief to the yen as the BOJ disappoints soon after by staying on hold.

Sanae Takaichi wins LDP leadership and becomes prime minister

Takaichi’s election victory and premiership rattles markets, driving the so-called “Takaichi trade” as investors are concerned she’ll loosen the government’s purse strings.

Fed cuts rates

The yen finds little support despite another Fed cut, with fiscal concerns looming large in Japan.

Fed cuts rates

The Fed cuts rates for a third consecutive meeting. Fiscal concerns persist in Japan.

BOJ hikes

The BOJ raises rates by 25 basis points to 0.75%, the highest level in about 30 years, yet the yen still weakens on the lack of more hawkish messaging.

JGB market meltdown

Takaichi’s decision to call a snap election and a proposal to consider cutting the sales tax send bonds into a tailspin.

BOJ holds rates; Fed conducts rate checks

The BOJ keeps rates unchanged amid market volatility. The yen surges on speculation of intervention after the Federal Reserve Bank of New York conducts “rate checks” on the currency.

Takaichi election landslide

Takaichi’s LDP secures a powerful mandate and a supermajority, lifting the yen and JGBs as investors bet she will bring more stability to policy making.

BOJ holds rates

The yen continues to depreciate as the BOJ stands pat.

BOJ holds with three dissenters

Rates stay unchanged amid uncertainty over the Middle East crisis. Three board members wanted rates to be raised to 1.0%.

Japan intervenes in FX market

Authorities step in after dollar-yen breaches 160. Price moves and the BOJ’s accounts suggest further intervention during Golden Week holidays.

Japan jawbones the yen

Finance Minister Satsuki Katayama indicates resolve to intervene to prop up the yen if needed.

Investors are on high alert for further weakening in the yen, with any potential rate hike from the BOJ still about a month away, and the ongoing Middle East conflict roiling markets.