The Japanese currency, yen, has reached a 34-year low against the US dollar, dropping to 160.17 per dollar, which is the lowest since April 1990. There are speculations that Japanese authorities might intervene to support the currency for the first time since late 2022.
The downward trend of the yen has been ongoing since early 2021 due to various factors. The Bank of Japan (BOJ) maintaining very low interest rates while other central banks like the US Federal Reserve have been raising borrowing costs has contributed to this decline. Despite the BOJ raising interest rates last month for the first time in 17 years, the trend has continued as expectations of US interest rate cuts diminish in the face of above-target inflation.
The weakening yen has been advantageous for Japanese exporters, boosting their profits and 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 reiterated their readiness to intervene in the exchange rate to prevent sharp movements but have so far refrained from stepping in 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.