Reasons for the weak yen and its impact on the Japanese economy.

The Japanese central bank’s decision to keep interest rates low at a time
when central banks around the world,
including the Federal Reserve, are seeking to raise interest rates,
caused the Japanese yen’s value to significantly decline.
The currency reached levels of 140 against the US dollar,
which are thought to have been reached for the first time in almost 25 years.

The Bank of Japan still believes that its purpose is to reinforce the notion of inflation
in the minds of consumers and businesses after the years they experienced a state of deflation,
despite the fact that prices in the United States are far higher than prices in Japan.

But even though the value of the yen has decreased,
this is still a good sign for the economy,
consumers, and businesses.

The perplexing question is whether Japan’s policymakers should
alter the Central Bank of Japan’s monetary policy or try to support the yen
and keep it from depreciating through intervention in the currency markets.

topic’s

Some of the reasons for the depreciation of the Japanese yen

Gold rises with the decline of the dollar in light of the rising global inflation.

Some of the reasons for the depreciation of the Japanese yen

The most important of these reasons is that at the time of raising interest rates in the United States,
Japan is still maintaining low levels of interest rates,
and this in turn is reflected in US dollar-denominated assets that are more attractive to investors.
The interest rate hike by the Federal Reserve and the Bank of Japan
is still setting a cap of 0.25% on the 10-year government bond yield.

A weak yen positively affects the performance of the economy

Because of the decline in the value of the Japanese yen currency,
this is in the interest of large Japanese companies that have branches around the world
and this increases the rate of profits transferred to them from abroad,
as the profits of these companies have increased to their highest levels since 1954,
and also contributes to the weakness of the yen currency In the activity of tourism cats because
it helps tourists to increase the purchasing power of their currencies compared to the yen.

Will the yen continue to decline further?

Expectations of a further decline in the value of the yen are closely related to interest rates
and raised by the Federal Reserve.
In the event that US Treasury bond yields decline,
this increases the gap in interest rates between Japan and the United States in light of the Bank
of Japan’s reservation on the maximum yield on bonds. Therefore,
the future value of the yen depends on changing policy on interest rates in the United States.

Gold rises with the decline of the dollar in light of the rising global inflation.

At the beginning of today’s trading,
the US dollar index declined in light of the increasing expectations that
interest rates would be raised by the European Central due to inflation,
which is greatly affected by the current energy crisis. This led to a rise in gold prices.

Where bullion finally recorded stability after 5 months of declines until August,
with the rise in the dollar and 10-year Treasury yields.

At the present time, central banks around
the world are seeking to raise interest rates to counter inflation,
at a time when expectations indicate a possibility of a 75 basis
point hike by the European Central at its meeting next Thursday,
while the People’s Bank of China decided to cut key interest rates by 10 basis points.
China wants to adopt a supportive policy during this quarter
while trying to gradually recover from the losses
associated with the Corona pandemic

The European ministers will discuss measures aimed
at curbing the high costs of energy next Friday,
starting from setting gas prices to suspending the trading of energy derivatives,
at a time when “OPEC Plus” agreed to reduce production
by 100,000 barrels per day in a month October

And gold prices recorded at the beginning of today’s trading for spot transactions,
an increase to 1,715 dollars per ounce,
by 0.3%, after the US dollar index fell by 0.3% earlier.

Reasons for the weak yen and its impact on the Japanese economy

Related Topics