The Japanese currency, yen, has fallen to its lowest point in 34 years against the US dollar, dropping to 160.17 per dollar. This is the first time since late 2022 that Japanese authorities have speculated about intervening to support the currency.
The decline in the yen has been ongoing since early 2021 due to the Bank of Japan (BOJ) maintaining very low interest rates while other central banks like the US Federal Reserve have been raising borrowing costs. Despite the BOJ raising interest rates last month for the first time in 17 years, the downward trend of the yen has continued as expectations of US interest rate cuts diminish in light of above-target inflation.
The weakening yen has been beneficial for Japanese exporters, boosting their profits and also benefiting tourists visiting Japan by putting more cash in their pockets. However, it has had a negative impact on household budgets by increasing the prices of imported goods.
Japanese officials have repeatedly stated their readiness to intervene in the exchange rate to prevent sharp movements but have not done so during the 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 in a news conference that exchange-rate volatility would only impact monetary policy if it significantly affected the economy and prices that couldn’t be ignored.
