The Japanese yen has collapsed to its weakest level against the US dollar in four decades, breaching the ¥162 threshold during morning trading in Tokyo.
The move marks the first time the currency has traded at such a low valuation since December 1986, signaling a sharp repricing of risk and policy expectations in Asian markets.
Selling pressure intensified as investors weighed the Bank of Japan’s continued hesitation to tighten monetary policy against a backdrop of stubborn inflation.
The central bank’s reluctance to act has widened the interest rate differential with the US Federal Reserve, further eroding the yen’s appeal for carry traders and institutional investors alike.
Compounding the currency’s weakness are growing concerns over the economic fallout from the conflict in Iran.
Geopolitical tensions have introduced additional volatility into global risk assets, prompting a flight to safety that has paradoxically strengthened the dollar while leaving the yen vulnerable due to its status as a funding currency in carry trades.