The Japanese yen hit its lowest level against the US dollar in nearly 24 years on Monday, dropping to 135.22 yen to the greenback, according to the Tokyo Exchange as of around 04:00 GMT. This is its lowest level since October 1998. The Nikkei 225 stock index was consequently also down, losing 3.05% during morning trading to 26,975 points.
Analysts say the depreciation of the Japanese currency stems from Tokyo’s reluctance to tighten monetary policy at a time when the US Federal Reserve along with many other leading central banks are hiking rates to tame soaring inflation. The widening interest-rate differential is triggering selling of the yen as investors move funds into higher-yielding dollars.
“The Bank of Japan is now the only central bank among developed nations which isn’t tightening monetary policy and this has strengthened yen crosses, leaving the yen as the only loser,” Takuya Kanda of Gaitame.com Research Institute in Tokyo told Bloomberg last week.
The currency has also suffered from the fact that Japan is a major energy importer, while energy prices have been surging due to the geopolitical uncertainty. A weaker yen makes imported goods, including energy, more expensive, thus pressuring Japanese companies and households.
Commenting on the situation, Hirokazu Matsuno, the secretary general of Japan’s cabinet of ministers, pledged that the country's authorities were ready to take steps to stabilize the yen if they consider it necessary. Earlier, Japanese Prime Minister Fumio Kishida voiced a similar position.
However, Bank of Japan Governor Haruhiko Kuroda last week said that policy tightening wasn’t on the table, and that the regulator would instead focus on boosting economic activity.
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