It will take 150 Japanese yen on Thursday to buy one US dollar. The Japanese currency has not been this cheap since 1990. Since the beginning of this year, the yen has already lost more than 30 percent of its value against the dollar.
That also means that oil and gas, often traded in dollars, have become much more expensive for Japan.
The decline in the yen is partly due to the rising interest rates in the United States. The Federal Reserve has already screwed up interest rates several times, making the dollar more expensive than in other countries. The fear of a global recession is also a factor. Investors consider the dollar to be safer than many other currencies. As a result, the euro has fallen almost 14 percent against the US currency since the turn of the year.
In Japan, interest rates are still meagre. The Bank of Japan believes this is necessary to stimulate the country’s economy and somewhat raise inflation.
The cheap yen benefits Japan, which produces a lot. It can offer its products cheaper abroad and therefore become more attractive. At the same time, things like energy and other products that the country imports are becoming more expensive. As a result, the trade balance was heavily negative in September, mainly due to expensive energy. This means that the country spent much more on importing goods and services than exporting.
Therefore, the Bank of Japan is expected to intervene in the foreign exchange market. The bank can do this by buying up a lot of yen itself. Earlier, the central bank intervened to support the value of the currency.