The lowest yen against the dollar since 1998

Banknotes of 10,000 yen (about 70 euros) in Tokyo on June 8, 2022
Banknotes of 10,000 yen (about 70 euros) in Tokyo on June 8, 2022 (Behrouz MEHRI / AFP)

Following the re-acceleration of US inflation in May, the yen fell against the dollar for nearly 24 years, and the Fed began more aggressive monetary tightening.

The dollar rose to 135.19 yen shortly after 04:00 GMT, the record since October 1998. It has fallen a little since then, and has been around 134.70 yen around 06:10 GMT.

The depreciation of the Japanese currency has been cruel since March and has been trading at the lowest level since 2002 against greenbacks since mid-April.

The problem is widening the gap between the Bank of Japan’s (BoJ) monetary policy, which is always super-capable, and the Federal Reserve’s (FRB) monetary policy, which tightens liquidity taps to curb unlimited inflation. is. united states of america.

Consumer prices in the United States rose 8.6% year-on-year from 8.3% in April, according to data released Friday, which weighed on financial centers around the world. The Nikkei Stock Average fell 3% at the closing price.

A sign indicating the price level of the Tokyo Stock Exchange and the yen against the dollar, June 13, 2022, the capital of Japan.
A sign indicating the price level of the Tokyo Stock Exchange and the yen against the dollar, June 13, 2022, the capital of Japan (Kazuhiro Nogi / AFP)

Soaring oil prices against the backdrop of the Ukrainian war have also contributed to US inflation, while Japan’s trade deficit has been a factor in deteriorating the flow of its own currency.

Traditionally, the depreciation of the yen has been favorably seen by the Japanese government, the Bank of Japan, and large corporations in the archipelago. This exchange rate trend is to make Japanese companies’ exports more competitive and to inflate the profits generated abroad.

However, this discourse is becoming increasingly unacceptable in Japan, as soaring import costs due to the depreciation of the yen have weakened the purchasing power of Japanese households and hurt small and medium-sized enterprises centered on the country. market.

Bank of Japan under pressure

Haruhiko Kuroda, the governor of the Bank of Japan, admitted on Monday that the “rapid depreciation of the yen” would increase uncertainty and make it difficult to predict corporate activities, which would be “negative” for the domestic economy.

Finance Minister Shunichi Suzuki received a question from the Diet in Tokyo on June 13, 2022.
Finance Minister Shunichi Suzuki received a question from the Japanese Parliament in Tokyo on June 13, 2022 (Kazuhiro Nogi / AFP)

Finance Minister Shunichi Suzuki said on Monday that “the depreciation of the yen has both positive and negative aspects,” and, like Mr. Kuroda, insisted on raising wages to offset the rise in import prices and create a booming circle. did.

In a very rare joint statement, the Japanese Ministry of Finance, the Bank of Japan and the Japanese Financial Services Agency (FSA) declared last weekend that they would “take appropriate action as necessary” against the depreciation of the yen. Without specifying which.

However, Tokyo’s unilateral intervention in the foreign exchange market seems unlikely, as is the BOJ’s reversal, which determines that the Japanese economy is not yet ripe for tightening credit terms.

Japan’s inflation rate (excluding perishables) reached 2.1% in April, the national record since 2015, but far from the levels observed in the United States and Europe. Moreover, the Bank of Japan currently does not expect this level of inflation to continue beyond the 2022/23 fiscal year that began on April 1.

Post-pandemic growth is still pending in Japan, with GDP in the first quarter down 0.1% compared to the fourth quarter of 2021. Recovery is expected throughout 2022, but headwinds are rising.

Haruhiko Kuroda, Governor of the Bank of Japan (right) at a hearing held in Tokyo on June 13, 2022
Haruhiko Kuroda, Governor of the Bank of Japan (right) (Kazuhiro Nogi / AFP) at a hearing held in Tokyo on June 13, 2022

However, some analysts believe that the BOJ will be forced to adjust its bond purchase policy as the yen continues to depreciate.

Asymmetric adviser Amir Amberzade said in a memo released Monday, “The prospects for this big change are far away as we feel that politicians (Japanese, editor’s memos) are starting to panic. No, “he said.

A two-day BOJ meeting will be held regularly on Thursday and Friday. Even though the majority of economist panels surveyed by the Bloomberg Agency in early June expect financial status, the tone and legitimacy of the agency should be scrutinized by the market.

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