Japanese Yen Hits 40-Year Low as Dollar Surges on Inflation and Middle East Tensions

TLDR

• The yen is on track for its biggest weekly drop since May, hitting 40-year lows against the dollar
• USD/JPY is holding near 163.90, with Japan’s CPI rising to 1.7% in June
• The U.S. Treasury has called on the Bank of Japan to raise rates faster
• Oil topping $100 a barrel has reignited inflation concerns, boosting the dollar
• Middle East tensions are adding pressure, with Trump threatening military action against Iran and the Houthis

The Japanese yen is heading for its worst weekly performance since May, falling to levels not seen in roughly 40 years against the U.S. dollar. The USD/JPY pair was trading near 163.90 on Friday during early Asian trading.

Japan’s government has tried to calm markets with verbal warnings, but those efforts have done little to stop the slide. Finance Minister Satsuki Katayama warned this week that authorities were ready to take “appropriate and bold action,” but traders largely shrugged it off.

Analysts say even direct currency intervention would only delay the problem. Without faster rate hikes from the Bank of Japan, the yen’s weakness is likely to continue.

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