Yen Defends 160 Level, Focus on Bank of Japan's Interest Rate Signals

The market's focus on the yen's weakness is shifting from foreign exchange intervention to the Bank of Japan's interest rate signals. Experts analyze that the Bank of Japan must clearly present its interest rate path to change the flow of the yen. The Bank of Japan maintained the policy interest rate at 1.0% during its monetary policy meeting on July 30-31, with the next meeting scheduled for September 17-18. The Japanese Ministry of Finance announced a total of 11.7349 trillion yen for foreign exchange interventions from April 28 to May 27, 2026. Recently, the dollar-yen exchange rate recovered from 159.22 to 160.07, having dropped to 158.34 during trading on July 31. Foreign exchange intervention is a measure to stabilize the value of the domestic currency, with Japanese authorities aiming to slow the pace of yen depreciation by buying yen and selling dollars. However, the intervention has not reduced the interest rate differential, and the market is responding sensitively to the possibility of interest rate hikes and policy wording. Changes in the Bank of Japan's interest rate signals are also related to global carry trades, which can influence dollar liquidity and risk asset preferences. Some market participants claim that the 160 yen level is a psychological defense line, mentioning the possibility of further intervention by Japanese authorities.

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