The Japanese Yen Continues to Weaken Against the Dollar

The Japanese yen is continuing to weaken against the US dollar, even reaching as high as over 129 yen per dollar at certain points. As of April 19, the dollar had grown 5.9% stronger than the yen, which is close to the largest percentage rise since 2016.

The Bank of Japan has not instituted a new monetary policy that would strengthen the yen and is continuing to keep interest rates low. Japan’s Finance Minister Shun’ichi Suzuki declined to comment on whether the Bank of Japan is considering intervening in the market.

However, Minister Suzuki’s comments to Parliament demonstrate a certain level of concern regarding the decline of the yen.

“A weak yen has its merit, but demerit is greater under the current situation where crude oil and raw materials costs are surging globally, while the weak yen boosts import prices, hurting consumers and firms that are unable to pass on costs,” Suzuki stated.

The Finance Minister’s comments were made shortly before the G20 Finance Ministers and Central Banks Governor Meeting to be held on April 20, in Washington. Among other meetings, Finance Minister Suzuki is set to meet with U.S. Treasury Secretary Janet Yellen, where the situation with the Japanese yen will possibly be discussed.

Additionally, polling of Japanese businesses in April conducted by private marketing research company Tokyo Shoko Research showed that approximately 40% suffered from the decline of the yen, an increase of 10% from the same poll conducted in December of 2021.

Yet, drastic intervention by the Bank of Japan may be unlikely, if Minister Suzuki’s comments hold true.

“Stability is important and sharp currency moves are undesirable,” Suzuki stated in the same speech before Parliament.

Further, Minister Suzuki has vowed to follow the G7’s agreement on currencies. The G7 group’s stance is that members will consult with each other before any forex market intervention and that too much volatility can endanger financial stability.

The Japanese yen is the third most traded currency in the world on a net-to-net basis. Thus, any rapid appreciation or depreciation of the yen has an impact on economies outside of Japan itself. We will keep you updated as the situation unfolds.