Treasury report highlights yen’s 51 percent decline since 2011, pressing Bank of Japan to tighten policy amid intervention warnings.
The US Treasury has increased pressure on the Bank of Japan to accelerate rate hikes as the yen trades at a 40-year low against the dollar. The semi-annual currency report notes substantial undervaluation, with the yen falling 51 percent in real effective terms since 2011, despite narrowing US-Japan rate differentials.
The report underscores inflation’s squeeze on household purchasing power, even as wage gains materialize. While the BOJ exited its long-standing stimulus program in 2024, political uncertainty around the Takaichi government’s willingness to tighten complicates the outlook. Japanese authorities have signaled readiness to intervene against excessive volatility.
Traders remain alert for potential verbal or actual intervention, though any moves are expected to trigger sharp, short-lived reactions rather than a sustained trend reversal.