In Japan, the yen is at its lowest against the dollar since 1998: here’s why
Once upon a time there was a Japan second world economy. Once upon a time there was a Japan as a direct challenger to the United States of America, at least on the economic and technological front. Just go and review the films of the Eighties set in the future, in which the “masters” were often the Japanese and the Americans were reduced to gallops (see for example the second chapter of the Back to the Future trilogy, set in 2015 with Marty McFly fired by a Japanese boss).
That Japan doesn’t seem to exist anymore. On Thursday 1 September, the yen even touched the lowest level of the last 24 years against the US dollar. The Japanese yen fell to 140 yen per dollar, reaching an unprecedented level in August 1998. The yen’s sell-off continued, with investors expecting a widening of the interest rate gap between Japan and the United States. , as the Bank of Japan remains committed to its ultra-loose monetary policy, while the Federal Reserve signals further rate hikes.
Since the beginning of the year, the Japanese currency has fallen by 25 points against the dollar. Passing 140, as Nikkei explains, marks another milestone in the sell-off of the yen in terms of investor sentiment. Compared to a dollar that benefits from the Fed’s rate squeeze, the yen pays a picture of economic uncertainty and the decision of the Japanese central bank to continue its ultra-accommodative monetary policy and diametrically opposite to that of its star-and-striped counterpart .
The yen sell-off has been going on for some time now and accelerated in mid-March. With Russia’s invasion of Ukraine fueling higher energy prices, the Fed and other central banks have signaled a more aggressive response to inflation. The BOJ, on the other hand, has maintained its position that price increases that crush Japanese homes and businesses will prove temporary.
From money to debt, from deficit to inflation: the shadows of the Japanese economy
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