Now Reading: Yen Falls to Four-Decade Low Amid Japan’s Policy Constraints
-
01
Yen Falls to Four-Decade Low Amid Japan’s Policy Constraints
Yen Falls to Four-Decade Low Amid Japan’s Policy Constraints
The Story in Brief
The Japanese yen has fallen below 160 per US dollar, its weakest level since 1986. Livemint attributes the decline to the wide US-Japan interest-rate gap, costly energy imports and Japan’s large public debt. The Bank of Japan raised its policy rate to 1% in June, but US rates remain much higher, encouraging investment in dollar assets and yen-funded carry trades.
Japan imports nearly all its crude oil and natural gas, increasing demand for dollars when energy prices rise. Authorities have intervened repeatedly to support the yen, but relief has been temporary. The report says the Bank of Japan’s large balance sheet and Japan’s weak long-term growth limit its ability to raise rates sharply without disturbing financial markets.
The Indian Opinion
The yen’s fall shows how currency movements reflect several pressures at once, rather than one policy decision. Intervention may slow a decline but cannot easily overcome lasting differences in interest rates, trade exposure and growth. Claims that Japan can quickly restore the currency through aggressive rate increases overlook the risks to borrowers and markets. The longer-term outlook remains uncertain, especially if energy prices stay high.
Source: livemint.com
This story was synthesised by AI from the source linked above.
