The Japanese currency, the yen, has recently hit its lowest level against the United States dollar in 34 years. This decline can be attributed to the Bank of Japan’s decision to keep interest rates at ultra-low levels while other central banks have raised borrowing costs. Despite recent efforts by the BOJ to raise interest rates, the yen’s downward trend has persisted.
The weaker yen has benefited Japanese exporters and boosted tourism revenue, but it has also led to higher prices for imported goods, putting pressure on household budgets. Japanese officials have expressed concern about excessive fluctuations in the yen’s value and have indicated their readiness to intervene in the foreign exchange market if necessary. However, they have refrained from doing so during its year-long decline.
Last Friday, the Bank of Japan maintained its benchmark interest rate at 0-0.1 percent. BOJ Governor Kazuo Ueda emphasized that exchange-rate volatility would only impact monetary policy if it significantly affected the economy and prices. He noted that if the yen’s movements had a substantial impact, adjustments to policy may be considered in response.
