The Japanese currency is falling to its lowest level in 24 years against the dollar, losing 0.60%, recording 140.13 yen per dollar.
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The Japanese yen is at its lowest level against the dollar in 24 years
The Japanese currency fell today, Thursday, to its lowest level in 24 years against the dollar, which also recorded a rise against the euro and the pound sterling in a market dominated by anxiety.
The yen, which is suffering, on the other hand, as a result of the Bank of Japan’s ultra-loose policy, lost 0.60% to 140.13 yen to the dollar.
Some analysts said that “any move beyond this level could lead to government intervention”, although economists have repeatedly noted “the great danger to Japan of any failed attempt to support the yen”.
“We are watching fluctuations in foreign exchange rates with great anticipation,” Chief Cabinet Secretary Hirokazu Matsuno told reporters in Tokyo, noting that “rapid moves in foreign exchange markets are not desirable.”
Comments indicated that the government is “still a bit far from taking further concrete action to help the yen”, while the BoJ’s insistence on sticking to ultra-low rates is likely to keep the door open for further declines.
The last time Japan supported its currency, during the Asian financial crisis in 1998, when it reached about 146 per dollar, as it had previously intervened at levels at 130 yen per dollar.
“European August CPI confirmed that global inflation is far from contained and renewed upward pressure on US yields to give tailwinds to the dollar-yen,” said Takuya Kanda, general manager at Gaitame.com Research Institute in Tokyo. “With the position of BOJ Governor Haruhiko Kuroda, players should only sell the yen.”
The yen’s decline towards 140 awakened talk of currency intervention
Federal Reserve Chairman Jerome Powell’s speech at Jackson Hole last week made clear that “concerns about an economic slowdown are not a priority”, eliminating persistent optimism about a softer stance on interest rates.
In contrast, Bank of Japan Governor Haruhiko Kuroda reiterated the need for “continuous easing”, highlighting once again the “glaring policy differences” between Japan and the United States, which Increased pressure on the yen earlier this year.
The gap in inflation-adjusted returns between the United States and Japan has widened, near its highest levels this year, as investors sought more attractive returns in the United States than in Japan. Traders will closely watch Thursday’s US manufacturing data and Friday’s employment report, considering This is the next potential catalyst for the weakness of the Yen.
Economists believe that “given that players are likely to feel a sense of accomplishment after hitting 140, the yen’s decline is expected to slow despite the continuing downward trend.”
Policy effect: monetary easing continues through April
Economists largely expect the Bank of Japan to stick to its monetary easing program until Kuroda’s term ends in April, even if it causes further weakness in the yen. The BoJ Governor insists that he must see larger wage increases before he can accept the fact that recent inflation levels above his 2% target are sustainable.
A weaker currency is helping to raise inflation in Japan, and Prime Minister Fumio Kishida has taken action with measures such as gasoline subsidies to reduce energy costs so that businesses and households complain about price hikes.
“It is difficult for the Bank of Japan to pursue a monetary tightening policy,” said Maki Ogawa, head of financial market research at Sony Financial Group, given the current economic situation. “So, first of all, that doesn’t mean there will be interference.”