Japan Intervenes in Foreign Exchange Markets Amid Yen Weakness

Japan's government intervened in foreign exchange markets on Thursday to prop up the yen ahead of the Bank of Japan's (BOJ) policy decision. The intervention, which was first reported by a market source, involved buying yen and selling dollars in New York.

The move comes as the yen has been under pressure due to the Iran war-driven energy shock, causing living costs to rise. Finance Minister Satsuki Katayama declined to comment on the intervention but hinted at U.S. involvement in the effort to stem the yen's decline.

U.S. Treasury Secretary Scott Bessent was quoted as saying that Japan may have intervened to prop up its currency, with the yen 'seems very undervalued to me'. The dollar sank to a more than two-month low against the Japanese yen on Thursday before resuming its decline in Asia.

The intervention is seen as a key test for BOJ Governor Kazuo Ueda's hawkish stance on interest rates. While Washington appears to endorse Tokyo's efforts to combat a weak yen, it has also signaled the need for the BOJ to push through further rate hikes.