Yen slides past 161, nearing 40-year low and intervention risk

The Japanese yen broke through the 161 level against the dollar late Thursday, inching toward a four-decade low and reviving bets that Tokyo will step in to prop up the currency.

After Japanese equity markets closed, the yen weakened sharply, crossing 161 before extending the slide later in the session to as low as 161.80 per dollar. That is the weakest since July 2024. A move past 161.96 would put the yen at its lowest since 1986.

The slide has drawn fresh warnings from finance officials. Finance Minister Satsuki Katayama told a G7 meeting that Japan was "prepared to take decisive action on speculative moves" in currency markets, according to reports.

The yen has stayed under pressure despite more than $70 billion in intervention by the finance ministry in May and a recent Bank of Japan rate hike that lifted borrowing costs to their highest since 1995.

BOJ Deputy Governor Ryozo Himino told parliament the central bank was watching currency moves closely because of their impact on the economy and inflation, according to reports.

Analysts told CNBC that intervention has done little to stem the yen's weakness because the forces driving it are structural. Elevated U.S. Treasury yields continue to support the dollar. Prime Minister Sanae Takaichi's administration has signaled a preference for accommodative monetary conditions, with growth-focused policies that keep the pressure on the yen.

A weaker yen has boosted Japanese exports and economic growth. It has also stoked worries about imported inflation and the erosion of household purchasing power at home.

The next line in the sand is 161.96. The finance ministry has not confirmed any intervention since the May operations.