Japanese authorities are considering intervening in the exchange rate of the yen for the first time in over a decade. This comes after the currency hit a 34-year low against the US dollar, dropping to 160.17 per dollar on Monday. The decline has been ongoing since early 2021, due to the Bank of Japan (BOJ) maintaining very low interest rates while other central banks 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 the face of above-target inflation. The weakening yen has been advantageous 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 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. He further added that adjustments in policy could be considered if the yen’s movements had a notable impact on