Japan has spent a record 11.7 trillion yen, roughly $73.5 billion, on currency intervention from late April to late May 2026, yet the yen has drifted back toward the psychologically important 160-per-dollar level. The temporary bounce from this massive outlay has essentially been erased.
Finance Minister Satsuki Katayama and Prime Minister Sanae Takaichi have signaled willingness to take bold action against speculation. However, the persistent interest rate gap between Japan's 0.5% policy rate and higher US rates continues to draw capital out of yen-denominated assets into dollar-denominated ones.
This weakness has turbocharged yen-funded carry trades, where investors borrow cheaply in Japan and buy higher-yielding assets, including Bitcoin. A sudden unwind of these trades could trigger sharp selloffs in digital assets due to thinner liquidity and higher volatility.