Japanese Yen Hits 34-Year Low Against US Dollar: Will Authorities Intervene?
In recent years, the Japanese currency, yen, has hit a 34-year low against the United States dollar. The yen dropped to 160.17 per dollar, which is the lowest since April 1990. This has sparked speculation that Japanese authorities might intervene to support the currency for the first time since late 2022.
The decline in the value of the yen has been ongoing since early 2021 due to several factors. One of the main reasons is that other central banks like the US Federal Reserve have been raising borrowing costs while the Bank of Japan (BOJ) maintains very low interest rates. Despite the BOJ raising interest rates last month for the first time in 17 years, this hasn’t stopped the downward trend of the yen as expectations of US interest rate cuts diminish with above-target inflation.
The weakening yen has been advantageous for Japanese exporters as it boosts their profits and also benefits tourists visiting Japan by putting more cash in their pockets. However, it has had a negative impact on household budgets by increasing prices of imported goods.
Despite warnings from Japanese officials that they would intervene in exchange rate fluctuations to prevent sharp movements, they have so far refrained from stepping in during a year-long slide of the currency. On Friday, the Japanese central bank maintained its benchmark rate at 0-0.1 percent. BOJ Governor Kazuo Ueda mentioned that exchange rate volatility would only impact monetary policy if it significantly affected economic growth and prices that couldn’t be ignored.
In conclusion, while there are concerns about a possible intervention from Japanese authorities to stabilize their currency, so far no action has been taken due to conflicting factors affecting its value.
