Back in October, the USD/JPY currency pair was holding at 151.95, which left the yen at its weakest level against the US dollar in 30 years.

Unstoppable inflation called into question the central bank’s view that rising costs were temporary, and that the economy needed another dose of stimulus. Late in November, analysts saw little hope interest rates would start rising any time before the end of Governor Haruhiko’s tenure, in April 2023.

By the new year, however, the yen was to see gains of as much as 16% due to the intervention of the Japanese government in the currency trading market, but also due to the widespread belief that the Bank of Japan was on course to tightening up its super-dovish monetary policy.

On January 3rd 2023 one US dollar would buy you only 129.79 yen, and “The yen’s current level is significantly undervalued, even after the recent rally”, suggested Rajeev De Mello of GAMA Asset Management.

Join us now for a currency trading adventure, as we track the yen’s progress since late October, and also try to decide whether or not its downward slide has finally stopped.


September 22nd, 2022 was the date the Japanese government said it was going to take the step, which had last been taken 24 years before, of directly intervening in the forex market to support its currency.

The initial attempt turned out to be a failure, but policymakers followed this up in October by quietly spending $42.4 billion towards the same end.

By the end of October, when a dollar was worth 148.57 yen, analysts like Atsushi Takeda of Itochu Research Institute felt that “big interventions at the level we’ve seen in September and October could happen another three to five times”.


In the second week of November, the yen climbed over 5%, which was more than it had done since 2008. The reason seemed to be an unusually slow US inflation reading, which gave traders hope the US Federal Reserve would ready itself to slow its rate hikes.

“It is an important turning point for the yen”, pronounced Lee Hardman of MUFG at the time. On November 11th, when the USD/JPY was at 138.78, the yen had still recorded losses of 17% against the USD for the year due to the Bank of Japan’s (BOJ) prolonged dovishness.

Governor Haruhiko Kuroda of the BOJ had been striving to achieve stable inflation of 2% for ten years.

Prices were rising, however, faster than they had done since 1982, sparked by the high costs of energy and the months of sluggish yen performance. Processed food in the country, which is largely imported and therefore vulnerable to yen weakness, shot up by 6.7% in the first three weeks of November. A stimulus package from the government, worth $210 billion, had been set in place the previous month to help out consumers.


The first day of December marked the fifth consecutive day of yen gains in the currency trading market, bringing its recovery since October up to 13%. Later in the month, to analysts’ surprise, the BOJ’s big policy adjustment arrived.

The central bank raised the cap on its ten-year bond yields, which seemed to justify hopes they were poised to grow more hawkish. The result was a big surge of 4.8% for the yen on December 21st.

On that day, when the yen was trading at 131.93 to the dollar, Amir Anvarzadeh of Asymmetric Advisors said, “The yen will likely become one of the strongest currencies next year”.

Peering Down the Road

An important reason for the BOJ’s worries that raising interest rates too early might impede the economy, is that real wages in the country have been shrinking since April 2022, which has been reducing people’s purchasing power.

On that score, Japanese consumers can expect prices on about 2,000 products to climb even more in February or March this year.

January 3rd saw the yen make ground against the Australian dollar (0.4%), the Norwegian krone (0.6%), and the Canadian dollar too (0.6%). As the new year got underway, Mingze Wu of StoneX Group wondered “whether the BOJ will be happy with current developments or will they step in to weaken the yen again”.

Erik Nelson of Wells Fargo foresaw a path for the yen to reach 125 to the dollar, and then even to 100, but “this relies on inflation in Japan continuing, growth trajectory remaining quite strong and BOJ at least providing a little bit more lift in those nominal yields”. Other analysts believed, in the short term, that the yen wouldn’t get much stronger than 125 to the USD.