The Japanese Yen has inflated to a historic 156 against a US dollar – fearing economic obliteration, the Bank of Japan had tabled a meeting to necessitate ‘policy intervention’
The Japanese currency has broken its 34-year old record – surpassing 155 against a US dollar. The financial analysts have attributed the aggressive interest rate hikes by Federal Bank in the United States behind this economic ruination. The soaring inflation in US – disincentivizing its supplier base has compelled the Federal Bank to lash-up interest pointers by a significant difference – discouraging consumer spending and transpiring a ripple effect on the economy.
The Japanese yen has weakened by 4.2% since March when the Bank of Japan officials last held a meeting. Addressing key intervention policies is what the investors and business-runners in Japan and globally will look most forward to in the monetary policy meeting.
A weaker yen would imply significant backstep for Japanese economy as it will stimulate fear among key investors refraining from spending their hard-earned money on a disadvantageous market system where – supply chain is broken, inflation is soaring and oil prices skyrocketing. The Japanese consumers will too have to heave the burden rendered by price increase due a weakening yen.
To curtail further Yen depreciation, BOJ tightens ‘intervention’
Peddling at a rather slower pace to defend sudden economic outburst, the officials of Bank of Japan (BOJ) after a two day meeting, left the short-term interest rate target at 0.01% and made smaller leaps to counterattack inflation.
A floating news corner speculated Japanese authorities looking to coordinate with South Korean administration to stem a mutually sound agreement which can protect both Asian nations from economic catastrophe amidst strengthening dollar against global currencies rather than being specific to the yen, also expecting the undertaking to mutually benefit both countries politically and economically.
At the monetary-policy meeting held today, the Bank of Japan board members unanimously voted to set aside intermittent guidelines for uninterrupted money market operations. Though it all sounds upright, the finance minister of Japan – Shunichi Suzuki has expressed concerns over economic obliteration in the light of depreciating yen value. Unaffordable living which has already loomed through Japan discouraging couples to practice fertility has reverberated throughout the country to an extent of invoking legislative intervention.
The Bank of Japan had purchased a record high government bonds seconds after US Federal Bank hiked interest rates in 2022. Liquidating government bonds further enhanced credit availability for Japanese businesses to repair their dismantled logistic network and gradually contain the ascending inflation – a monetary strategy which the officials kept unchanged in today’s meeting.
US Federal Bank shadows hope benefitting Japanese Yen
The amicability shared between US and Japan at the political front fails to align monetarily. United States Federal Reserve shared optimism of its booming economic performance, indicating beginning of rate-cutting cycle later this later. But the data on Friday showed U.S inflation came in line with forecasts, affirming that the reserve bank might delay cutting interest rates. The renewed motivation among investors and market speculates among Japan seized to sprint ahead of the announcement.
The government report showed prices rose 0.3% from February to March. It is the third straight month when prices spiraled inconsistent with Fed’s 2% target. After peeking at 7.1% in 2022, Fed’s forecasted index cooled down in most of 2023. Adhering to calmer indexes, most investors expected the cut to begin in June, but the Federal Reserve Chair Jerome Powell has resisted plans catering to an immediate cut in key rates expanding Japanese yen depreciation.
The dollar was last at 156.87, up by 0.8%, after hitting the 34-year high at 156.92. The Japanese yen for now has surpassed monetary expectations, the consequences of which can be devastating, especially for a nation already tangled in the web of higher inflation.
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