Yen Remains Under Pressure from BOJ Interest Rates
The yen is currently quite weak against the US dollar, hovering around ¥153 per US$1 and has weakened even further.
This yen weakening is driven by the Bank of Japan's (BOJ) low interest rate policy, while other countries, such as the US, have much higher interest rates. This has led investors to choose assets denominated in dollars or other currencies.
The Japanese government is also somewhat concerned about the yen's weakness, as it increases the cost of importing fuel and food, which will impact domestic prices.
The Bank of Japan (BOJ) has maintained its low interest rate (around 0.5%), while the central banks of the United States and many other countries have much higher rates. This has made investors more interested in investing in currencies other than the yen due to the potential for higher returns.
Although the BOJ has begun to raise interest rates slightly, it is acting cautiously because the Japanese economy remains fragile: low productivity, an aging population, and weak household consumption. Therefore, the market views the yen as less attractive.
Because the yen is weak, Japan, which imports a lot of energy and raw materials, feels burdened: imports become more expensive, which can drive up domestic inflation and erode people's purchasing power.
Because the yield differential between Japan and other countries is large, investors tend to borrow in yen (low cost) and invest their money in currencies/assets with higher yields a strategy called the "carry trade," which further weakens the yen.
Source: Newsmaker.id
