Uncertainty Over Japanese Yen Fluctuations: Will Authorities Intervene to Stabilize Currency?

Japanese authorities have been closely monitoring the fluctuations of their currency, the yen. Recently, it dropped to 160.17 per dollar, its lowest level in 34 years, before recovering to 155.01. There were rumors that intervention might be taken by the Japanese government to stabilize the currency, but officials did not confirm any such actions.

Despite this speculation, Japan’s central bank has kept its benchmark interest rate at 0 to 0.1 percent. Governor Kazuo Ueda stated that exchange rate volatility would only impact monetary policy if it significantly affected the economy and prices. While there is a possibility of adjusting policy in response to exchange rate movements, Ueda emphasized the importance of maintaining economic and price stability.

The Bank of Japan’s low interest rates compared to other central banks like the US Federal Reserve have been attributed as one of the reasons for Japan’s prolonged decline in yen value since early 2021. Although a weaker yen benefits Japanese exporters and tourism, it has adverse effects on household budgets due to increased import prices. Japanese authorities have expressed willingness to intervene if necessary but have refrained from doing so during the decline’s duration.