The Japanese yen has sunk to a 34-year low, trading as low as ¥160 to the dollar on Monday. Japan’s currency has shed more than a third of its value over the past three years, says Jonathan Yerushalmy in The Guardian. The Bank of Japan (BoJ) has held interest rates “extraordinarily low”, even as they rise in other countries. It finally raised them in March – the first hike in 17 years – but only to just over 0%. At a meeting last week the BoJ held rates steady, signalling that it is in no rush to hike again and precipitating “another round” of yen selling.
Currency traders have finally realised “that Japan is following a policy of benign neglect for the yen”, says George Saravelos of Deutsche Bank. Speculation about rapid rate hikes was an illusion. While yen weakness does increase inflationary pressure, that is still not a pressing concern in Tokyo, since a weak currency has other advantages: it is helping exporters to stay competitive and driving a tourism boom.
The yen’s new low didn’t last long, says Richard Abbey on Bloomberg. In wild trading on Monday it quickly gained 3% against the US dollar, triggering suspicions that the government had intervened to stem the bleeding. While Tokyo may not mind a steady decline, it wants to avoid a destabilising currency crash.
Exporters profit
A weak yen is good for Japan’s export-focused multinationals. The local Topix index has been one of the world’s top performers with a 15% gain this year. Unfortunately, the yen’s slump also eats into those gains in sterling terms, with the London-listed iShares MSCI Japan Fund up by a more modest 7% for the year-to-date.
“The drip, dr
