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Japanese Yen Plummets to 30-Year Low Against Dollar, Prompts Emergency Meeting

Kalyani Jha
28 Mar, 2024

The Japanese yen faced a significant downturn on Wednesday, plummeting to its weakest level against the dollar since 1990. This sharp decline prompted urgent discussions among Japan’s top financial officials, who deliberated on potential interventions to stabilize the currency. The U.S. dollar surged to an impressive 151.975 yen before making a slight retreat, marking a historic high against the yen in over three decades.

Following the emergency meeting, Masato Kanda, Japan’s chief currency diplomat, underscored their preparedness to take decisive action against any disorderly movements in the foreign exchange market. This stance mirrors previous interventions undertaken by Japan to defend the yen in 2022. Kanda’s remarks were echoed by Finance Minister Shunichi Suzuki, who emphasized the government’s readiness to take “decisive steps” against excessive currency fluctuations.

The recent decline of the yen, surpassing 7% this year, has been attributed to the widening gap between U.S. and Japanese bond yields, a trend that the Bank of Japan’s recent interest rate hike failed to alleviate. Analysts believe that a potential shift in the U.S. Federal Reserve’s policy, including anticipated interest rate cuts, could serve as a catalyst for the yen’s recovery. Additionally, a decrease in government bond yields outside Japan might also contribute to stabilizing the yen.

Despite the intervention’s short-term effectiveness, experts caution that it is not a sustainable long-term solution. Bipan Rai, global head of forex strategy at CIBC Capital Markets, emphasized the need for broader economic shifts to address the yen’s persistent decline. Rai highlighted the importance of potential changes in the U.S. Federal Reserve’s interest rate policies and global bond yields outside Japan as key factors that could influence the yen’s trajectory.

As Japan grapples with the yen’s rapid depreciation, financial authorities remain vigilant and prepared to implement measures to counteract disruptive currency movements. The ongoing discussions and potential interventions reflect Japan’s commitment to maintaining stability in its currency amid evolving global economic dynamics.