Japan burned through $73.6 billion trying to prop up the yen, with limited results. The USD/JPY pair hovers near 159, repeatedly testing the critical 160 level. The Bank of Japan's next policy meeting June 15-16 sets the stage for a potential rate hike.
Between April 28 and May 27, Japanese authorities deployed ¥11.73 trillion ($73.6B) in currency interventions. The yen continues to weaken against a broad basket of G10 currencies, indicating structural issues beyond US rate differentials.
Markets price a 78-81.5% probability of a rate increase. Nearly two-thirds of economists surveyed by Reuters forecast a 25 basis point hike to 1.0%. BOJ Governor Ueda warns against pushing long-term yields higher too quickly, given Japan's government debt-to-GDP ratio is the highest among developed nations.
For investors, the yen dynamic impacts crypto through the carry trade. The yen historically funds leveraged positions across asset classes. A sudden yen strengthening could trigger carry trade unwinding, creating selling pressure on risk assets, as seen in August 2024.