US and Japan Intervene to Support Yen Amid Prolonged Divergence
The US and Japan have intervened in the foreign exchange market to support the yen, which has been under pressure due to differences in monetary policy between the two countries. The Bank of Japan maintained a more accommodative stance, while the US Federal Reserve kept interest rates high, prompting investors to sell the yen and buy the dollar.
The rise in oil prices caused by the war with Iran also increased Japan's energy import bill, further pressuring the currency. As a result, the yen fell to its lowest level in nearly four decades, passing ¥163 to the dollar for the first time since 1986 during New York trading on 21 July 2026.
To halt the slide, the Bank of Japan decided to keep the interest rate at 1%, its highest level in 31 years. However, markets had expected more decisive action and saw the rate-hold as insufficient to stop the yen's dive. Japanese authorities intervened in the foreign exchange market by buying yen and selling dollars in New York.