The Japanese yen has undergone significant fluctuations in trading, reaching its lowest level in 34 years at 160.17 per dollar before recovering to 155.01. Speculation arose about potential intervention by Japanese authorities to stabilize the currency.
Despite rumors of intervention, officials in Japan did not confirm any actions taken to support the yen. The currency’s downward trend has persisted since early 2021 and is attributed to the Bank of Japan’s low interest rates compared to other central banks such as the US Federal Reserve.
While a weaker yen benefits Japanese exporters and tourism, it has adverse effects on household budgets due to increased import prices. Japanese authorities have expressed willingness to intervene to prevent drastic changes in exchange rates but have refrained from doing so during the yen’s prolonged decline.
The Bank of Japan maintained its benchmark interest rate at 0 to 0.1 percent, with Governor Kazuo Ueda stating that exchange rate volatility would only impact monetary policy if it significantly affected the economy and prices. The possibility of adjusting policy in response to exchange rate movements was acknowledged by Ueda, emphasizing the importance of economic and price stability.
In summary, despite rumors of intervention, Japanese authorities have refrained from taking action to stabilize the yen, which has been on a downward trend since early 2021 due to low interest rates compared to other central banks like the US Federal Reserve. While a weaker yen benefits exporters and tourism, it negatively impacts household budgets due to increased import prices. The Bank of Japan maintains its benchmark interest rate while acknowledging the possibility of adjusting policy in response to exchange rate movements for economic and price stability purposes only if it significantly affects them.
