Key facts
- Japan and South Korea engaged in a rare, coordinated currency intervention.
- Japan may have sold as much as $58.97 billion in yen-buying intervention.
- The Bank of Japan held its benchmark interest rate at 1% by an 8-1 vote.
- One Bank of Japan member dissented, proposing a rate hike to 1.25%.
- Governor Kazuo Ueda signaled potential further rate hikes by the Bank of Japan.
- The Bank of Japan lowered its inflation forecast for the current fiscal year.
- The yen reversed intervention-driven gains, falling back to the 160 range against the dollar.
- The U.S. Treasury notified banks of potential further yen intervention.
- Japan's special account for foreign exchange reserves recorded a surplus of $31 billion in fiscal year 2025.
- Bitcoin traded near $63,900 during the period.
Japan and South Korea have undertaken a rare, coordinated intervention to support their currencies, with the U.S. Treasury alerting banks to potential further action in the Japanese yen market. Japan may have sold as much as $58.97 billion in its latest efforts to bolster the yen, a move that caused the currency to strengthen sharply against the dollar. This intervention, a yen-buying and dollar-selling operation conducted by the Bank of Japan in New York, was its first such action in three months. The yen's gains, however, moderated and were later reversed, with the currency falling back into the 160 range against the dollar as corporate customers bought dollars and persistent commercial demand for dollars emerged. Asian markets, led by South Korea's Kospi, rallied, with the yen initially holding gains after suspected intervention ahead of the Bank of Japan's decision.
The Bank of Japan maintained its short-term policy rate at 1% by an 8-1 vote, with one member dissenting and proposing a hike to 1.25%. Governor Kazuo Ueda signaled potential further rate hikes, citing upside risks to inflation from rising wages, prices, oil costs, and a weak yen. The central bank also lowered its inflation forecast for the current fiscal year but warned of upside inflation risks. Ueda indicated that the pace of rate hikes could accelerate if financial conditions are deemed too accommodative. Federal Reserve officials, meanwhile, signaled the need for further interest rate hikes, pushing Treasury yields to multi-year highs and causing stocks to retreat.
Japan's special account for foreign exchange reserves recorded a surplus of $31 billion in fiscal year 2025, the second-highest on record. A weaker yen boosted yen returns on foreign assets, offsetting interest costs on yen-denominated financing bills. The yen's fluctuations occurred as traders watched for intervention following the Bank of Japan's rate decision. Bitcoin traded near $63,900, largely unmoved by the Bank of Japan's decision.