The yen fell Wednesday to its lowest level in 20 years against the dollar, weighed down by the growing gap between Japan’s ultra-accommodating monetary policy and the tightening of that of the Fed in the face of US inflation.
A dollar was trading for 126.15 yen around 06:30 GMT, having briskly crossed the 125.86 yen mark a few minutes earlier, a first since 2002.
The yen has been on a declining slope against the dollar since early 2021, when US treasury yields rose sharply amid the strong rebound in US growth and the start of the economic acceleration. inflation in the country.
The Japanese currency had already lost 10% of its value against the greenback last year, and has dropped more than 8% since the start of this year.
The weakness of the Japanese currency increased further when the US Federal Reserve (Fed) began to tighten its monetary policy to counter rising inflation in the United States.
Because against the tide of other major central banks, the Bank of Japan (BoJ) maintains its ultra-accommodative monetary policy, considering that macroeconomic conditions are still not met in Japan to tighten it.
Soaring energy and other commodity prices, which have intensified since the outbreak of war in Ukraine at the end of February, have further accelerated the fall of the yen since last month.
The yen is traditionally a safe haven in the event of severe market turbulence. However, this status has not worked since the beginning of the Russian-Ukrainian conflict, because soaring energy prices are widening the trade deficit of Japan, a major importer of hydrocarbons.
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The BoJ continues to view the weakness of the yen as an overall positive for the Japanese economy for the time being, in particular by improving the price competitiveness of the country’s exports and by boosting the profits of its companies when they convert their income into yen. the stranger.
But this dogma, to which the government also adheres, has begun to be debated in Japan. Because the sharp drop in the yen combined with soaring energy prices is weakening small and medium-sized businesses centered on the national market, as well as the purchasing power of Japanese households, whose consumption is already at half mast.
Japanese politicians have recently made multiple statements expressing alarm at the national currency’s plunge. On Tuesday, Japanese Finance Minister Shunichi Suzuki said the government would closely monitor developments in the foreign exchange market.
Prime Minister Fumio Kishida, for his part, told parliament that rapid fluctuations in the rate of the yen were undesirable and that the stability of the exchange rate was important.