The Japanese central bank (Nichigin) conducted its first currency intervention to try and pull the staggering yen from the hot water it has been plunged into for months, selling the US dollar and buying the yen from the Japanese market, Kyodo news agency reported on Thursday.

The Bank of Japan's intervention marks its first since June 1998, as the yen's value continues dwindling, reaching its lowest rate since 1998, the Japanese media outlet added.

Kyodo said the size of the intervention was unknown, but it is believed that the Japanese government had to sell some of the US Treasury bonds it had in its central bank.

Nichigin left its short-term interest rates at -0.1% following a two-day policy meeting. Immediately after the decision to keep the interest rates unchanged, the yen immediately went into freefall, hitting its lower price in 24 years at 145.24 yen per USD on the Tokyo Stock Exchange, beating the former record of 135.19 yen per dollar.

The Japanese yen sold at the lowest price against the US dollar on June 13 for the first time since 1998, as the United States is battling soaring consumer prices, one of whose repercussions have been a widening monetary policy gap between Japan and the US.

The yen has been in freefall for months, especially in light of the Fed aggressively hiking interest rates to try and mitigate the soaring inflation. The current financial situation is expected to maintain its momentum through the coming period as the US grapples with several issues, including the sanctions on Russia that have been causing supply cuts, surging gas prices, and rising food prices.

The Bank of Japan said it would adhere to its long-standing monetary easing program, which it hopes would lead to stable growth, a step that goes against what the Fed is doing at home.

The contradicting policies have given the USD a lot more ground against the Japanese currency, with the former buying 135.19 yen. This beats the former record of 126 yen on the dollar, which was the Japanese currency's lowest since 2002. This high rate had not been seen since the 1998 Asian currency crisis.

While other countries like the US and UK are currently facing arguably more serious cost of living problems, soaring commodity prices, fuelled by the war in Ukraine, pushed Japan’s consumer inflation above the Bank of Japan’s 2% target for the first time in seven years.

The yen took its latest hit after the US Federal Reserve's Federal Open Market Committee (FOMC) announced Wednesday that it was raising the federal funds rate by 75 base points to between 3% and 3.25%, which would be the third increase in a row after the central bank decided in April to increase rates to attempt and keep inflation under control.

On Wednesday, Fed chair Jerome Powell said it would sometime become appropriate to slow the rate of interest rate increases; the median forecast showed the bank expects to increase interest rates to at least 4.4% by the end of 2022. However, it could continue to rise, hitting 5% in 2023.

Despite the fact that higher interest rates are supposed to limit intra-bank loans and thus create new money, the Economic Policy Institute found in an April study that corporate profits accounted in the last two years for 54% of inflation in the US. This means that the problem is price speculation, not overeager lenders.