Almost half of the Japanese companies believe that a weak yen is bad for business. The currency is experiencing a sharp decline affecting many companies’ outlook. Business sentiment has also become divided because of the yen.
If you want to know more about this Japanese currency, you’re in the right place. This post will help you update yourself with the latest news about the yen’s position.
Is Yen Declining?
The yen started at ¥115 against the dollar in January 2022. The currency was stable for a few months. However, it declined again during the first week of June.
The currency fell to ¥134.55 against the dollar, a new 20-year low. This decline worried the authorities, and a meeting was held to discuss the change. After the meeting of BoJ, MoF, and FSA, the yen traded at ¥133.8.
Yen experienced five days of decline and stabilized after a meeting of Japanese authorities was held. Of course, this does not mean that the currency is completely stable. It may decline again if the correct measures are not taken.
Why Is Yen Declining?
The primary reason behind the yen’s decline is the loose monetary policy of the BoJ. There is a wide difference between the interest rate in Japan and central banks of other countries. All banks around the world are increasing rates to tackle inflation.
However, Japan is still following a zero interest rate policy. This has created a large disparity between this G10 country and other places. Some people don’t consider the weak yen to be an issue. Of course, the opinion in the business sector differs.
Will The Authorities Intervene?
A meeting was held after the yen saw a sharp decline for five days. The central stated their concerns about the currency. This is why many people think that Tokyo will intervene in this issue. However, this is relatively unlikely.
Japan mainly focuses on sharp yen rises, and its stance is relatively easy whenever a weakness occurs. The last time the country interfered in the yen’s decline was in 1998, during a financial crisis.
Does A Weak Yen Boost Economy?
Haruhiko Kuroda, BoJ’s governor, has implied that a weaker yen generally affect the economy positively. This is why you may be wondering about it. So here’s a look into how the yen affects the economy.
Many people, including John Vail, a chief global strategist, state that currency weakness allows Japan’s economy to maintain competition. The decline also attracts more foreign investors to the Japanese stock market.
This is because they believe the shares are undervalued compared to other markets. Since the start of 2022, Japanese stocks have outperformed various rivals. So weak yen may help with boosting the economy. However, that is not a confirmed outcome.
This is everything you need to know about the yen’s decline. The currency has seen fluctuations since the start of 2022. It dropped during the first week of June but stabilized after five days.
Whether the stability is temporary or not is yet to be seen. This also depends on whether the relevant officials will intervene in the currency decline or not.