The Japanese yen has dropped to a 40-year low against the US dollar, putting investors on watch for potential government intervention by Japan that could ripple through US stocks, the Treasury market and the broader global economy. This shift in the yen’s value is largely due to the war with Iran and a rebound in the dollar.
Impact on the US Economy
The US Federal Reserve’s decision to hold rates steady or increase them has led to a strengthening of the dollar, putting pressure on the yen and other currencies. The US dollar index is up 3% this year, rebounding after tumbling 9% in 2025.
Currencies typically rise and fall based on differences in interest rates in different countries. The Bank of Japan on June 16 raised its benchmark interest rate to 1% – the highest level since the 1990s. However, the BOJ’s interest rate is still considerably lower than that of the Fed, which in June held its rate steady at a range of 3.5% to 3.75%.
A weaker yen can make imported goods more expensive, and Japan imports much of its food and energy. The US-Israeli war with Iran and the surge in oil prices have had outsized impacts on Asian economies that are reliant on oil from the Middle East.
Original reporting: El Paso News (HLL/CB) — read the source article.
