The Bank of Japan (BOJ) made a pivotal decision last Thursday to keep interest rates near zero, a move that has sent shockwaves through the global currency markets. This policy stance has contributed to the Japanese yen plunging to multi-decade lows against the U.S. dollar. Last Friday, the USD/JPY pair broke above 158, and by Monday, it had surged past 160.
Market participants were eager for a more definitive commitment from the BOJ regarding potential policy tightening or measures to stabilize the weakening yen. However, Governor Kazuo Ueda refrained from addressing the currency's downturn directly. Instead, he hinted that the BOJ might consider raising rates in the future, offering little immediate reassurance to traders.
As a result of the BOJ's ambiguous stance, traders continue to favor higher-yielding foreign currencies over the yen. This trend persists despite the BOJ's first rate hike in March, ending a 17-year hiatus. Although the policy rate has nudged above zero for the first time in eight years, it has not been sufficient to curb the yen's depreciation.
The latest BOJ meeting has thus been viewed as ineffective in halting the yen's decline, leaving investors and businesses navigating a challenging financial landscape. The ongoing uncertainty underscores the delicate balance central banks must maintain in influencing currency values while fostering economic growth.
Reference(s):
Japan was just given every excuse to trigger BOJ intervention
cgtn.com
