The yen loses massively in value, large parts of the Japanese economy suffer.
Tokyo. At the end of last week, leading media houses sent out breaking news. “The yen has reached a 32-year low,” it said on several channels. One US dollar was worth around 149 yen on the financial market Monday afternoon. The last time the Japanese currency was this weak was when a huge real estate bubble burst in the East Asian country in the early 1990s. Today, the reasons for the descent lie abroad: while large economies have raised their key interest rates, the Bank of Japan (BOJ) wants nothing to do with it.
Practically everywhere in the world, the zero interest rate policy, which leading economic areas remembered for more than a decade with the global financial crisis from 2007, seems like a thing of the past. But in Japan, the world’s third largest economy, it is still a reality. And on Monday, Central Bank Governor Haruhiko Kuroda stated that this will remain the case for the foreseeable future. Kuroda told parliament: “Japan is in the middle of a recovery from Covid-19.” This recovery was not to be stalled by raising interest rates.
Kuroda’s credo: “Higher commodity prices, caused by the situation in Ukraine, lead to an outflow of money from Japan abroad, which puts pressure on the economy.” However, according to Kuroda, these are temporary phenomena. It is therefore more important that zero interest rates and government bond purchases strengthen domestic demand.