The yen continued to decline this week, with the effects of approximately $97 billion in intervention over the past month fading. Yen weakness is increasing the burden on Japanese households and companies and could also affect bitcoin.
The yen fell to ¥160.16 per dollar on 28 August, erasing much of the gain generated by the latest intervention. The government and the Bank of Japan injected approximately ¥15.4 trillion from 30 July to 26 August to support the exchange rate, and also carried out an unprecedented joint intervention.
US interest rates have remained higher than those in Japan, while the Federal Reserve’s monetary policy outlook is encouraging investment in dollar assets, leaving the yen with limited support. Comments from Fed officials this week are also unlikely to become a factor driving the dollar lower.
The factors behind yen weakness are also spilling over into bitcoin, which temporarily fell below $77,000 following remarks by Chair Warsh. Depending on developments in carry trades, additional selling pressure could emerge, analysts have noted.
In the past, the unwinding of yen-funded carry trades has weighed on the cryptocurrency market. In August 2024, bitcoin and ethereum fell by as much as approximately 20%. The CEO of Metaplanet has offered an outlook suggesting that demand could expand going forward.