The Dollar Soars to 40-Year High Against the Yen. Japan's Warnings Don't Stick.

The dollar hit 162.77 yen on July 1—its strongest since 1986—breaking through technical resistance despite repeated Japanese warnings. Markets dismissed the rhetoric as empty: the interest rate gap between U.S. and Japanese policy rates remains too wide to halt the carry trade making yen sales profitable. Traders now await whether Japan will attempt direct intervention.