Japan Spends Record $96.5 Billion to Support Yen

Japan's Finance Ministry revealed that authorities spent a record $96.5 billion intervening in foreign exchange markets over the past month to support the yen. This massive intervention, which spans from July 30 to August 26, shows Tokyo's resolve to pull the yen away from four-decade lows.

The yen has been under pressure due to currency weakness threatening profits at Japan's heavyweight exporters and pushing up import costs, including for energy. With 95 percent of its energy coming from the Middle East, Japan is exposed to supply disruption caused by the Iran war.

The Bank of Japan (BOJ) has kept interest rates low compared with markets like the US, encouraging investors to continue funding global trades with cheap yen. The BOJ held rates steady at its last meeting in July, but policymakers have signaled a willingness to step up the pace of tightening.

Washington has offered support for Tokyo's efforts, stating that Japan could use a Covid-era Federal Reserve backstop for major central banks. US Treasury Secretary Scott Bessent said earlier this month that Washington will do 'whatever it takes' to support Tokyo's effort to stabilize the yen.