The yen fell Monday to a new low against the dollar for nearly 24 years, in the wake of the reacceleration of inflation in the United States in May, which augurs a more aggressive monetary tightening by the Fed. Shortly after 6:00 a.m., the dollar rose to 135.19 yen, its highest since October 1998.
Since April, the yen had already been trading at its lowest levels in twenty years against the greenback. In question, the growing gap between the monetary policy of the Bank of Japan (BoJ), always ultra-accommodating, and that of the American Federal Reserve (Fed), which tightens its liquidity tap in an attempt to tame unbridled inflation. in the USA.
Consumer prices in the United States climbed to 8.6% in May year on year, against 8.3% in April, the highest since 1981, according to data published Friday which depressed the world's financial centers, while like the Tokyo Stock Exchange on Monday, whose flagship Nikkei index dropped 2.78% around 6:30 a.m. Soaring oil prices against the backdrop of the war in Ukraine are also fueling US inflation while widening Japan's trade deficit, an aggravating factor for the course of its national currency.
Traditionally, a weak yen is looked upon favorably by the Japanese government, the BoJ, and the big firms of the archipelago. Because this exchange rate trend makes the exports of Japanese companies more competitive and inflates their profits generated abroad. But this discourse is becoming less and less accepted in the country, because the sharp increase in the cost of imports, amplified by the fall of the yen, weakens the purchasing power of Japanese households.
In a rare joint statement, the Japanese Ministry of Finance, the Bank of Japan, and the Japanese financial policeman (FSA) said last Friday that they would take “appropriate measures if necessary” against the fall of the yen, without specifying which ones. A unilateral intervention by Tokyo on the foreign exchange market seems unlikely at present, however, as does a reversal by the BoJ, which judges that the Japanese economy is still far from being ripe for monetary tightening.
Inflation (excluding fresh products) in Japan reached 2.1% in April over one year, a national record since 2015 but far from the levels observed in the United States or Europe. However, analysts believe that the BoJ will be forced to adjust its bond-buying policy if the yen's plunge continues to deepen.