Japan is facing an unprecedented monetary crisis, marked by the recent devaluation of the yen, which reached a 34-year low against the dollar. The Japanese currency plummeted to 160 yen per dollar, the lowest value since April 1990, which raised alarms in the country’s economic spheres.
This unstable scenario emerged after the Bank of Japan (BoJ) decided to keep its interest rate target unchanged last Friday, one month after a rare increase — the first in 17 years. The decision dashed expectations of further increases in interest rates, which could have stabilized the currency.
Faced with the worsening of the situation, the Japanese authorities intervened directly in the foreign exchange market. The intervention occurred at a critical moment, as the yen was already on a steep downward trajectory. This state action managed, at least temporarily, to strengthen the yen, which adjusted to 154.28 per dollar.
Experts point out that volatility in the value of the Japanese currency could have broad repercussions both domestically and on global markets, given Japan’s economic importance. Furthermore, the lack of clear indications from the government about future increases in interest rates adds uncertainty to the market, potentially prolonging economic instability.
The next few weeks will be crucial for the Bank of Japan and the country’s government, which need to find ways to stabilize the currency without harming economic growth, in a delicate balance between inflation control and economic stimulus.
