On Oct. 31, the Japanese yen exchange rate fell to 151.74 against the U.S. Dollar due to the Bank of Japan’s failure to adjust its monetary policy as expected. This led to the accelerated selling of the yen and the buying of U.S. dollars. Many believe that global instability is a big contributor to the rise of the dollar, and the yen may continue to depreciate.
For Japan, this would mean an increase in the cost of imports, and it can lead to an economic downturn. However, many Japanese entrepreneurs view the depreciation of the yen as conducive to the growth of the Japanese economy.
On Oct. 31, the Bank of Japan (BoJ) allowed greater flexibility in its monetary policy and is looking to move towards a tighter monetary policy. However, investors in the New York market generally believe that Japan’s loose monetary policy will continue. The BoJ kept its negative interest rate policy and will likely continue for quite a while. It is also increasingly unlikely for the Japanese government and the BoJ to intervene in the market.
On the other hand, the U.S. Federal Reserve Board is maintaining high interest rates to curb price increases, and the U.S. Dollar remains strong in the current economic background. The contrast between the Japanese and the U.S. currencies is becoming apparent. Therefore, investors sold the yen and bought U.S. dollars, resulting in the yen on Oct. 31 falling to 1 U.S. dollar against 151 yen. At the start of the year, 1 U.S. dollar was 129 yen.
The Federal Reserve announced on Nov. 1 that it will keep interest rates unchanged, but it left the door open to future interest rate hikes to slow down inflation. Affected by this, the exchange rate remained at 1 U.S. dollar against 150 yen or so.
On the reasons for the depreciation of the yen, Professor Frank Xie from the University of South Carolina Aiken School of Business told The Epoch Times that global instability and increased wars significantly affect the high U.S. interest rates. He believes this is the reason for the appreciation of the dollar. Mr. Xie explained that besides the strong U.S. Dollar, Russia’s restrictions on Japan’s energy and the depreciation of the yen will likely continue, leading to an increase in the cost of imports and potentially an economic downturn.
However, Japanese entrepreneur and China-Japan political and economic commentator Mr. Lu believes that the depreciation of the yen is a necessary step to revitalize the Japanese economy. He believes it will continue for a long period, benefiting the Japanese economy and exports. Mr. Lu also mentions the strong purchasing power of the yen and believes it is unlikely to cause issues.
The depreciation of the yen is favorable to Japan’s exports, boosting export-oriented businesses and increasing the earnings of companies like Toyota. However, it is unfavorable to imports as the cost of importing raw materials increases. The rise in energy prices and the impact of the Russian invasion of Ukraine have already led to an increase in the cost of imports. This depreciation of the yen may have negative effects on businesses and the lives of the Japanese people, as expressed by Toyota’s president and the president of Uniqlo Japan.