The yen weakened against the dollar Thursday after the Bank of Japan kept borrowing costs unchanged, extending a retreat for the currency that came after the Federal Reserve forecast fewer rate cuts.
The BOJ said after a two-day policy meeting that it would hold rates at around 0.25 percent, pushing the yen cheaper. At 4 p.m., the dollar was at 156.09-14 yen, compared with 153.66 on Wednesday.
Although the bank said in its policy statement that "Japan's economy has recovered moderately" and "is likely to keep growing", it also pointed to risks ahead.
These include "developments in overseas economic activity and prices, developments in commodity prices, and domestic firms' wage- and price-setting behavior".
The Fed on Wednesday cut interest rates by a quarter point, its third straight reduction.
But it signaled a slower pace of cuts ahead as inflation remained sticky and uncertainty surrounds President-elect Donald Trump's economic plans.
Japanese businesses are also wary about the trade and investment environment, given Trump's pledge to impose tariffs on imports.
Tsuyoshi Ueno, senior economist at NLI Research Institute, told AFP ahead of Thursday's decision that one reason the BOJ did not hike was that "the picture of next year's wage increases will be clearer in January".
Political factors were another reason, according to Ueno.
"As the minority government is discussing budget and tax reforms involving the opposition... it would be bad timing for the BoJ to hike its rate" as that could cool the economy, he said.
The government recently passed an extra budget worth nearly 14 trillion yen to help pay for a massive economic stimulus package.
It includes handouts for low-income households, fuel and energy subsidies and assistance to small businesses.
Prime Minister Shigeru Ishiba is hoping the funds will lift the economy but also boost his popularity after the ruling coalition's worst election result in 15 years.
Ishiba has also promised to spend 10 trillion yen through 2030 to boost Japan's semiconductor and artificial intelligence sectors to help the nation regain its tech edge.
© 2024 AFP
15 Comments
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mist1
Giving the yen another push down the hill. Hmm.
Rakuraku
Surprise, surprise. Soon, we will see usual titles like inflation above the 2% target for 29 months, wages down, real consumption down…etc.
These old models, which the BOJ relies on (basically, the lower the interest rate, the better for the economy), no longer work. If they did, the Japanese economy, after 20 years of near 0% interest rates, would be flourishing.
The problem is that with Abenomics, they pushed things so far that it’s now probably impossible to exit without significant damage. The BOJ is caught between a rock and a hard place.
HopeSpringsEternal
US$ on front foot catching a bid, Trump effect, capital moving into US markets, meanwhile risk of tariffs weighing on Yen - record tourism only a band aid
HopeSpringsEternal
BOJ normalization possible in context of elevated inflation. Problem, it's all imported inflation as real land prices falling due to aging and depopulation - thus core deflationary trend in Japan fully intact
Abe234
Well, if you make the yen strong, many investors will be very upset, especially those who bought their ETFs when the yen was weak. Now of course, if you strengthen the yen, we will be able to see our portfolio fall in value (as we may have invested in the U.S or Global fund), but going forward, it might be cheaper to buy but how strong will the bank of JP let it to strengthen?
I guess if the strong yen is great for Japan today, how come all the JPN exporters and companies in Japan were complaining about it when the dollar was 110 yen in the past? Lubbish! and just think of all those tourists who can't come to Japan to boost our hospitality industry. Strengthen the yen and all the articles here will flip to complaining how strong the yen is.
HopeSpringsEternal
At present, no clear catalysts for Yen strength, next stop 160? BOJ may have to $SPEND = Sell $ again...$ouch!!!
As for Global $GPD, while it will grow 3 to 4% this year, Japan on same $ basis will contract approx. 10% at 155
kohakuebisu
The yen is undervalued. I suppose we just have to hope nothing important gets sold off on the cheap while this state continues.
I suspect the cost push inflation coming out of Covid will prove to be permanent and will not go away even if the wars stop. We will not see commodity prices fall to their previous levels.
u_s__reamer
Slumping Yen? Next year Trump will fix it!
HopeSpringsEternal
Lost in discussion, $ also massively slumping, buys FAR less than half 'Real Assets' it bought less than 5 years ago
All currencies destroyed by Biden Admin Global Destabilization/Wars, but Yen's a BIG Loser, approx. +80% LOSS in Real Asset Purchasing Power.
grc
Stating that all currencies are destroyed together makes no economic sense. And saying it’s all Biden’s fault betrays a severe lack of political and economic understanding
Mirchy
I'll soon be able to spend my vacation for free.
WoodyLee
Comes Monday it will be back to were it belongs, 150 or less.
shogun36
when?
always "pushing things back" in hopes of fantasy results.
when are they going to cut the crap already?
SomeWeeb
Better complain about those tourists more. I'm sure they aren't helping by dropping 20 billion into the economy .
HopeSpringsEternal
Japan's approaching $30K per capita and that includes deficit spending and massive Govt. debt servicing, combined constituting approx. 10% of GPD. Markets no longer fear the BOJ = See Above, Doom Loop