Since the summer of 2026, the Japanese yen has been going through one of the most turbulent periods in its recent history. Despite benchmark interest rates being raised to 1% — their highest level in 31 years — and a massive intervention by the Bank of Japan alongside the US Treasury in late July, the currency remains permanently weakened. At the beginning of September, the USD/JPY pair is still trading around 160, having already given back more than half of the gains achieved during the intervention. A scenario that, at first glance, only concerns foreign exchange market specialists... Except that it doesn't. When an imbalance of this magnitude affects one of the world's major currencies, the entire foreign exchange market absorbs the shock — including the EUR/USD, EUR/GBP or EUR/CNY pairs handled daily by British SMEs importing or exporting abroad. Here is why this seemingly distant tension can directly affect the actual cost of your next international payments, and why currency hedging is no longer a subject reserved only for large corporations.
A disconnect between interest rates and exchange rates
On paper, logic dictates that a currency should strengthen when its interest rates rise. This is precisely what did not happen with the yen. Despite a rise in Japanese interest rates to 1% in July and 10-year bond yields close to 2.9% — a multi-decade high — the yen remained the weakest major currency of August 2026.
This paradox is explained by the scale of the gap that still remains with US rates, which continue to fuel "carry trade" strategies: investors borrow in historically cheap yen to invest in higher-yielding assets elsewhere. As long as this gap remains significant, selling pressure on the yen persists, regardless of the Bank of Japan's efforts.
Three additional factors have reinforced this pressure in recent days: a much more aggressive tone from the US Federal Reserve under its new chair, Kevin Warsh, which revived expectations of a US rate hike in September, following a US monetary policy committee already deeply divided this summer; growing fiscal concerns in Japan; and high oil prices, fueled by tensions in the Middle East, which are weighing on Japan's trade balance.
Interventions that only buy time
At the end of July 2026, faced with a yen at its lowest level in decades, US and Japanese authorities carried out an exceptional coordinated intervention, buying back the equivalent of nearly $90 billion worth of yen over two days. The result was spectacular in the short term: the USD/JPY pair fell by several points in a few hours.
But the effect quickly faded. About ten days later, the rate had already risen back to its pre-intervention levels. A currency intervention can correct a temporary market excess, but it does not close a structural interest rate gap. This is precisely what most market analysts are pointing out today: as long as the US Federal Reserve and the Bank of Japan do not align their monetary policies more closely, the question is not whether new shocks will occur, but when.
Why this tension goes far beyond the yen alone
A British company that has no business with Japanese suppliers or customers might legitimately feel unaffected by this issue. This is a common but costly error of perspective.
The currency market operates like a system of communicating vessels:
Extreme volatility on a major pair like USD/JPY leads to a general increase in risk aversion, which spreads to other currencies, including the pound sterling and the euro.
Market participants unwinding their positions on the yen often also adjust their positions on other currencies in the process, magnifying movements that have nothing to do with the economic fundamentals of your sector.
Expectations regarding the next decisions of the Fed and the BoJ — the market now prices in a Japanese rate hike with a nearly 90% probability for the September 17-18 meeting, while firmer remarks from the Fed have in turn pushed up bets on US tightening — directly influence general sentiment towards the dollar, and therefore the GBP/USD or EUR/USD rates you use to invoice or pay your US, Chinese, or Middle Eastern suppliers.
In other words: an SME that pays its suppliers in dollars or invoices its clients in foreign currencies does not need to be exposed to the yen to suffer the shocks it causes across the entire foreign exchange market.
The real cost of this volatility for an SME
In concrete terms, this instability translates into three very direct risks for a business that has not secured its foreign exchange operations:
An exchange rate that deteriorates between the quote and the payment. On a contract lasting several weeks or months, a variation of 3 to 5% — an order of magnitude observed on USD/JPY in a few days this summer — can be enough to wipe out an entire profit margin. This cost is often added to international transfer fees that are already poorly controlled by most SMEs.
Cash flow that is difficult to forecast. Without visibility on the future exchange rate, it becomes almost impossible to budget confidently for international purchases or sales.
Uncontrolled exposure to central bank announcements. A decision by the Fed or the BoJ can move a rate by several points in a few minutes, a risk that the majority of SMEs face without even being aware of it.
Protecting yourself from volatility: a matter of method, not business size
Contrary to popular belief, currency hedging is not reserved for large groups with a trading desk. Today, simple tools allow any SME to neutralise a large part of this risk:
Lock in an exchange rate in advance using forward contracts, to know precisely the amount you will pay or receive, regardless of how the market behaves in the meantime.
Monitor exchange rates in real time, rather than discovering the rate applied at the moment of the transfer.
Rely on a dedicated expert capable of anticipating the market events that really matter to your business (central bank decisions, macroeconomic publications).
This is exactly the role played by OSolto. As an authorized international payment intermediary (ORIAS no. 26004337, under the supervision of the ACPR), OSolto aggregates the best market solutions to offer SMEs a single point of contact, transparent rates, and currency hedging tools tailored to their business volume, without the hidden fees of traditional banks.
Key takeaways
The yen has not finished making headlines: between a still-pronounced interest rate gap with the United States, a highly anticipated Bank of Japan decision on September 18, and bond markets under tension, volatility is expected to remain high in the coming weeks. But beyond the Japanese case, it is a broader reminder: in a context where major central banks are moving in different directions, no currency is completely isolated from the shocks of others.
For an SME that buys or sells internationally, the question is therefore not whether an upcoming central bank announcement will move exchange rates, but whether you will be protected the day it happens.
Speak to an OSolto expert before your next foreign currency transaction → Free, no-obligation analysis, response within 24 hours.
