The Japanese yen has fallen to its lowest level against the dollar since 1986

The dollar/yen exchange rate recently rose by 0.4% to 160.39, a level last seen in December 1986.

As the Japanese yen continues to lose value since the beginning of the year, the dollar/yen exchange rate surpassing the 160 mark has increased speculation regarding intervention by Japanese authorities in the foreign exchange market.

Masato Kanda, Japan’s Deputy Minister of Finance for International Affairs, stated that they are ready to intervene to support the yen 24 hours a day if necessary.

Kanda emphasized that the developments in the exchange rate negatively affect the national economy, saying, “We will intervene if there is excessive volatility in the exchange rate due to speculative reasons.”

It has been claimed that the Bank of Japan (BoJ) intervened in the foreign exchange market to support the currency when the dollar/yen exchange rate exceeded 160 in April 2024. The dollar/yen exchange rate tested the 160.24 level on April 29, surpassing 160 for the first time since June 1986.

While it is stated that the movements in the country’s currency could prompt action from Japanese authorities, analysts suggest that approximately $60 billion in reserve sales might have occurred after the 160.24 level seen on April 29.

In the foreign exchange market, the high interest rate differential between the US and Japan has significantly caused the yen to lose value against the dollar and other currencies.

Although Japan has raised interest rates to a range of zero to 0.1% this year, interest rates above 5% in the US are increasing investors’ demand for dollar assets.

Analysts emphasized that as long as the dynamics underlying the yield gap between the US and Japan, which are among the world’s largest economies, do not change, the Japanese currency will remain under pressure.

Analysts stated that the depreciation of the Japanese yen against the dollar for some time has supported the profits of Japanese export companies, leading many Japanese companies’ stock prices to reach record levels. However, they noted that this situation has made it difficult for non-export-oriented Japanese companies concerning costs.

As the weakness of the yen raises questions about how it will affect the Japanese economy and the BoJ’s interest rate outlook, the yen, which has been depreciating for the past three years, has fallen by more than 12% against the dollar since the beginning of the year.

source: prepared by Melisa Beğiç

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button