NOn Friday, before the announcement of the Bank of Japan’s (BoJ) decision, the currency was trading above 155 yen per dollar, but it surpassed 158.44 this morning.
The Japanese central bank’s monetary policy council unanimously decided on Friday to maintain the benchmark interest rate, one month after raising the short-term benchmark interest rate to 0.1%, the first increase in 17 years.
“It is necessary to pay close attention to developments in financial and foreign exchange markets and their impact on economic activity and prices in Japan,” the BoJ said in a statement.
Hours earlier, the Japanese Finance Minister said he was ready to intervene and halt the yen’s sharp fall.
“In line with our policy, the Government will continue to closely monitor developments in the foreign exchange market and will take all necessary measures,” Shunichi Suzuki told the media.
“We are concerned about the downside of the weaker yen,” said the minister, adding that dealing with rising prices is a priority for the Japanese government.
A weak yen tends to boost the stock market, as it inflates exporters’ foreign remittances, but also increases the costs of imports of energy and raw materials, on which Japan is dependent.
The yen has been depreciating sharply against the dollar, among other currencies, largely due to the interest rate differential between the two countries. The trend has accelerated in recent weeks because the U.S. central bank is not expected to start cutting rates anytime soon.
The Japanese Government intervened for the last time in October 2022, when the Japanese currency approached 152 units against the dollar.
In recent statements, Japan’s central bank governor Kazuo Ueda indicated he will consider a policy change if the impact of the weak yen on inflation “cannot be ignored.”
Read Also: Inflation? Bank of Japan revises forecast upwards, but maintains interest rates
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