Yen at Weakest Since 1986 Amid Elevated US Rates and Japan Fiscal Worries
TOKYO: The Japanese yen has weakened to 162.29 per US dollar, its lowest level since 1986, increasing the cost of imported energy and food and adding pressure on households and businesses in the resource-dependent country.
Japan relies heavily on imports of crude oil, natural gas, and many food products. The weaker yen has raised the local currency cost of these imports, increasing the likelihood of higher prices for consumers at fuel stations and supermarkets.
The currency’s decline has continued despite the Bank of Japan raising its policy interest rate to 1.00 percent, a move intended to support the yen. While exporters may benefit from a more competitive exchange rate, businesses that depend on imported goods are facing higher costs, putting pressure on profit margins.
The yen’s move beyond the closely watched 162 per dollar level has renewed market attention after similar volatility last year, when authorities intervened to curb excessive currency fluctuations. Rising import costs could also increase inflationary pressure and weaken domestic consumer spending.
Meanwhile, Prime Minister Sanae Takaichi is considering additional fiscal support measures, including a temporary freeze on consumption tax for food and beverages to reduce pressure on households. However, the proposals could add to Japan’s already high public debt, raising concerns among investors.
Finance Minister Satsuki Katayama has reiterated the government’s readiness to take decisive action in the currency market if necessary and said Japan remains in close coordination with the United States.
Market participants are closely watching both Japan’s domestic policy decisions and the outlook for US interest rates, with the yen’s near-term direction expected to depend on developments on both fronts.
