The Japanese yen experienced significant fluctuations in trading, dropping to 160.17 per dollar, the lowest level in 34 years, before recovering to 155.01. Speculation arose regarding potential intervention by Japanese authorities to stabilize the currency.
Despite rumors of intervention, officials in Japan did not confirm any actions taken to support the yen. The currency’s downward trend has persisted since early 2021, attributed to the Bank of Japan’s low interest rates compared to other central banks like the US Federal Reserve.
While 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 to prevent drastic changes in exchange rates, but have refrained from doing so during the yen’s prolonged decline.
The Bank of Japan maintained its benchmark interest rate at 0 to 0.1 percent, with Governor Kazuo Ueda stating that exchange rate volatility would only impact monetary policy if it significantly affected the economy and prices. The possibility of adjusting policy in response to exchange rate movements was acknowledged by Ueda, emphasizing the importance of economic and price stability.