The Japanese currency, yen, has reached its lowest level against the United States dollar in 34 years, dropping to 160.17 per dollar. This is the first time since late 2022 that Japanese authorities have been considering intervening to support the currency. The decline of the yen has been ongoing since early 2021 due to a variety of factors including low interest rates from the Bank of Japan (BOJ) and rising borrowing costs from other central banks such as the US Federal Reserve. Despite efforts by the BOJ to raise interest rates last month for the first time in 17 years, the downward trend has continued as expectations of US interest rate cuts diminish with above-target inflation.
The weakening yen has had both positive and negative impacts on various aspects of Japan’s economy. On one hand, it has boosted profits for Japanese exporters and made tourism more affordable for visitors by putting more cash in their pockets. However, it has also led to an increase in prices of imported goods which negatively impacted household budgets.
Japanese officials have repeatedly stated their readiness to intervene in exchange rate fluctuations but have so far refrained from taking action during this year-long slide of the currency. On Friday, the Japanese central bank kept its benchmark rate at 0-0.1 percent. BOJ Governor Kazuo Ueda mentioned during a news conference that significant movements in exchange rates would only affect monetary policy if they had a notable impact on the economy and prices that couldn’t be ignored.