Japan’s Yen: Weakest in 20 Years

The yen has fallen to more than two-decade lows against the dollar, owing to Japan’s differing views on inflation from its global peers. 

A weaker yen can help or hurt the economy, businesses, and consumers. The severity of its decline, however, has raised concerns about the BOJ’s policy and the possibility of government intervention in currency markets. 

The main reason is the rise in interest rates in the United States, while Japan’s remain extremely low. As a result, dollar-denominated assets are more appealing to investors seeking higher returns. The yield on 10-year notes has risen above 3%, the highest in years, as traders continue to expect the Federal Reserve to hike interest rates aggressively.

 Other factors include the strength of the US economy and labour market, while Japan continues to lag behind its peers in resuming pre-pandemic economic growth. Japan’s trade deficit is also likely contributing to the yen’s depreciation. 

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