#日元跌至40年低点 When Both Rate Hikes and Intervention Fail: The Deep Predicament of the Yen Falling Through 162

On June 30, 2026, the yen fell below the 162 mark against the U.S. dollar, hitting 162.17, a new 40-year low since December 1986. This decline broke through the 161.95 defense line that had prompted Japanese authorities to intervene in the market in July 2024.

Most surprisingly, the yen's depreciation occurred against the backdrop of the Bank of Japan's continued rate hikes. On June 16, the Bank of Japan raised its benchmark interest rate to 1%, the highest since 1995. The Japanese government also used a record 11.73 trillion yen to intervene in the foreign exchange market from late April to late May. Yet, despite both rate hikes and intervention, the yen continued to fall relentlessly.

The root cause lies in the vast U.S.-Japan interest rate gap that cannot be bridged. The U.S. federal funds rate remains at 3.50% to 3.75%, and the market expects the Federal Reserve may raise rates three more times this year. Meanwhile, Japan's 10-year government bond yield is only 2.64%, while the U.S. counterpart stands at 4.451%. Such a wide interest rate differential drives global capital to continuously engage in yen carry trades—borrowing low-cost yen, converting it to dollars, and investing in high-yield assets. Chen Zilei, president of the Japan Society of Shanghai, stated bluntly: "This yen depreciation is occurring against the background of the Bank of Japan's rate hikes, indicating that the market lacks confidence in the BOJ's current monetary policy."

The impact of the yen's depreciation presents a stark contrast. Export companies see a sharp increase in profits—every 1 yen fall in the yen boosts Toyota's operating profit by 50 billion yen. However, the surge in import prices for energy and food drives up inflation and erodes purchasing power. "All of Japan is growing uneasy." Meanwhile, Japan's government debt as a share of GDP ranks highest among developed countries, and rapid rate hikes will increase the fiscal burden. The central bank finds itself trapped in a dilemma of "wanting to stabilize but unable to turn the tide."

Until the U.S.-Japan interest rate differential eases, the yen's current exchange rate predicament may be difficult to break. 162 might be just another stop along the way.