The Japanese yen has been on a wild ride lately, and it’s been making headlines all over the financial world.

So, the yen has been in a bit of a freefall against the US dollar, and on Monday, it hit a 34-year low. That’s right, the last time the yen was this weak was way back in April 1990! This had everyone talking about whether the Japanese authorities would step in to prop up the currency, like they did in late 2022.

But then, something crazy happened. The yen suddenly surged from 160.17 per dollar to 155.01 later in the day. This got traders buzzing, with many speculating that the authorities had indeed intervened and bought up a bunch of yen to stop the slide.

It was a public holiday in Japan, so the officials didn’t come out and confirm whether they had actually intervened or not. It’s all a bit of a mystery.

But why has the yen been struggling so much in the first place? Well, it all comes down to interest rates. The Bank of Japan (BOJ) has been keeping its rates super low, while the US Federal Reserve and other central banks have been hiking their borrowing costs. This has made the yen less attractive to investors, and it’s been sliding against the dollar for over a year now.

Last month, the BOJ did raise interest rates for the first time in 17 years, but it hasn’t been enough to turn the tide. The yen’s downward spiral has continued, especially as expectations of interest rate cuts in the US have faded due to stubborn inflation.

Now, a weak yen isn’t all bad news. It’s actually helped Japanese exporters rake in more profits, making Japan a more affordable destination for tourists. But on the flip side, it’s been putting pressure on household budgets by making imported goods more expensive.

Japanese officials have been saying for a while that they’re ready to step in if the exchange rate moves too sharply, but they’ve held off on intervening during the yen’s yearlong slide.

On Friday, the BOJ decided to keep its benchmark rate unchanged at 0 to 0.1 percent. The central bank’s governor, Kazuo Ueda, said that exchange-rate volatility could affect monetary policy if it had a significant impact on the economy.