The yen falls to a new 24-year low against the dollar

A dollar was worth more than 140 yen for the first time since 1998

Behrouz MEHRI

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The yen plunged to a new 24-year low against the dollar on Thursday as Japan sticks to its longstanding monetary easing policies in contrast to tightening from the US Federal Reserve.

A dollar was worth more than 140 yen for the first time since 1998 in European afternoon trading, as the greenback also strengthened against other currencies.

The yen fell against the dollar by around 115 in March, prompting analysts to flag the possibility of government intervention.

The sharp drop was mainly due to divergent approaches by the Bank of Japan and other central banks, including the Fed, which raised interest rates to combat the war-fuelled inflation spike in Ukraine.

David Forrester, senior FX strategist at Credit Agricole CIB in Hong Kong, said the overshoot of 140 yen to the dollar marked an “important technical level”.

“Before, if you look at when the Bank of Japan stepped in to buy yen, it was usually around those levels,” he told AFP.

The Japanese currency fell 0.6% to 140.13 yen to the dollar around 2:25 p.m. GMT.

Earlier on Thursday, the Japanese government spokesman repeated his comments on the importance of stability in foreign exchange markets, saying “rapid changes are not desirable.”

But he gave no indication that special measures, such as the finance ministry ordering the BoJ to buy the yen against other currencies to bolster its value, were on the cards.

With the increase in volatility, “the government plans to carefully monitor the trend of the foreign exchange market with a high sense of urgency,” Hirokazu Matsuno told reporters.

Last week, Fed Chairman Jerome Powell declared his commitment to aggressive rate hikes, eliminating any hope that the US central bank could ease its stance to avoid an economic slowdown.

But Bank of Japan policymakers have refused to abandon easy money measures put in place a decade ago, aimed at generating growth in the world’s third-largest economy and sustained price increases of around 2% .

In addition, “Rising energy prices throughout the year weighed heavily on Japan’s trade balance and current account balance…but that has eased off a bit recently,” he said. Forester.

Inflation in Japan is at its highest level in seven years and prices for non-fresh food items rose 2.4% year-on-year in July, but the BoJ sees the increases as temporary and says it is committed to its current policy.

“Inflation in Japan is not only accelerating, but extending beyond just food and energy price inflation,” which is beginning to indicate “that maybe the BoJ needs to change a little about his position,” Forrester said.

“If they persist on this front, the finance ministry may have to intervene to reduce imported inflation due to the weak yen,” he added.

Although it makes imported goods more expensive in Japan, a weaker yen can also inflate the profits of Japanese companies selling products overseas, including big companies such as Toyota and Nintendo.

On Wednesday, Prime Minister Fumio Kishida announced a further relaxation of the country’s strict border rules to allow tourists to take package tours, but without a guide.

The decision was made partly “from the standpoint of taking advantage of a cheap yen,” he told reporters.

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