Japanese yen falls to 40-year low against dollar

The Japanese yen reached a 40-year low against the U.S. dollar, prompting traders to watch for possible renewed intervention by Japanese officials. The currency's slide stems from expectations that U.S. interest rates may stay steady or rise in coming months, combined with a rebound in the dollar. The U.S. dollar index has risen 3% this year after falling 9% in 2025.

Background on yen decline The Bank of Japan raised its benchmark rate to 1% on June 16, the highest level since the 1990s. That rate remains below the range of 3.5% to 3.75% maintained by U.S. officials. The gap has drawn investment toward the United States and away from Japan, strengthening the dollar and weakening the yen.

The yen had already reached multi-year lows in recent months before slipping further in recent days.

Potential intervention effects Japanese officials stepped in earlier this year by selling about $70 billion in assets in late April and early May. The move had minimal impact on U.S. markets and did not reverse the yen's decline. Traders now expect possible additional intervention as soon as this weekend.

Any sale of U.S. Treasury holdings could push yields higher, though analysts note the scale would likely remain too small to affect the broader U.S. bond market materially. A sudden rise in the yen could also raise borrowing costs for investors using yen-funded trades to hold U.S. stocks, potentially forcing sales to repay loans.