The Japanese yen reached its lowest level since November 2022, weakening to 145 per dollar on Tuesday. This decline is attributed to investors’ expectations of aggressive interest rate hikes by the US Federal Reserve.
The yield on the 10-year US Treasury note rose above 3.2%, reaching its highest level since 2018. Meanwhile, the yield on the 10-year Japanese government bond remained near zero, leading to a widening yield differential. Consequently, the yen has become less attractive to investors.
Japanese Finance Minister Shunichi Suzuki commented on the currency market, stating that the government would take suitable measures in response to excessive movements. However, he did not confirm any specific plans for intervening or actively weakening the yen.
The depreciation of the yen presents difficulties for Japanese policymakers. It raises import costs and reduces exporters’ earnings. However, the Bank of Japan is hesitant to raise interest rates due to potential harm to the fragile economic recovery.
With the ongoing interest rate hikes by the US Federal Reserve, it is anticipated that the yen will face continued downward pressure. Despite this, Suzuki’s comments indicate that the government is prepared to intervene if the yen weakens excessively.
