Yen Slumps to 40-Year Low Amid BoJ Interest Rate Hesitation

The Japanese yen has hit a four-decade low against the US dollar, trading at 163.24 on July 22, its weakest level since December 1986.

Finance Minister Satsuki Katayama has vowed to take 'decisive actions as needed' to support the currency, but analysts warn that reversing the yen's decline will be a difficult task for authorities.

The Bank of Japan is widely expected to keep interest rates unchanged on July 31, having hiked them to a 31-year high last month. However, Bloomberg News reported that monetary policymakers were open to hiking at a faster pace due to the effect on inflation from the weaker yen.

Stephen Innes at SPI Asset Management noted that Japan's policy choices continue to point towards a weaker currency, and that 'Tokyo can stop the traffic for an afternoon, but it has yet to convince the market that the motorway itself has changed course'.