🚨 The US dollar/yen has just touched a very dangerous level.

The USD/JPY hit 163.24 today, marking a 40-year high. However, the currency pair plummeted sharply within a few hours.

Such a trend usually signals potential intervention by the Ministry of Finance. Japan typically remains silent when the yen weakens, but intervenes directly in the market once the exchange rate reaches a level deemed unacceptable by officials.

Last week, Japan's Vice Minister of Finance already stated that officials are closely monitoring exchange rate movements.

Today, Japan also released June trade data. Imports rose 25.4% year-on-year, while exports increased only 19.3%, resulting in a trade deficit of 406.9 billion yen for Japan.

A weaker yen is usually beneficial for exporters, as it makes Japanese goods cheaper for foreign buyers. However, Japan relies almost entirely on imported oil and energy, and these purchases do not decrease due to a weak yen; Japan still needs the same amount of oil.

Therefore, the cost of each barrel of oil is now higher in yen terms, and with the ongoing US-Iran conflict, oil prices have risen again.

Japan is facing increased energy costs while a weak yen exacerbates this burden. This is why imports grew by 25.4% in June, while exports grew only by 19.3%, leading to a trade deficit of 406.9 billion yen even in a month with strong exports.

Japan has intervened individually before, but with little success in strengthening the yen.

The only real solution now is coordinated intervention with the Federal Reserve, similar to what happened in 2011, when the G7 jointly sold off the yen after an earthquake and tsunami caused it to rise too quickly and sharply.

This situation has not yet occurred, and until it does, Japan is primarily fighting this battle alone.