Economics Expert Offers Suggestion to Rescue Japanese Yen

Keio University Professor Sayuri Shirai provided some insights to the Bank of Japan regarding the effective way to avert a massive Japanese yen fall. The former policy board member of Japan’s central bank affirmed and is mindful that interest rate hikes are inconceivable.


We are interested to learn about the latest developments regarding the Japanese yen. We have read reports that this foreign currency is weakening lately, and this scenario may leave our readers worried, especially those holding units of the Japanese official currency.


Hence, by sharing this latest foreign exchange-related news with our followers, we believe we can be of help in keeping them properly updated about the Japanese yen and staying proactive.


According to the Monday, January 24, 2022 foreign exchange report posted online by Japanese news outlet Nikkei Asia, Shirai remarked that the Bank of Japan’s commitment to loose monetary policy pertains to the monetary base and not to the interest rates.


Nevertheless, she pointed out that instance does not translate that it is favorable to raise interest rates and normalize policy in utter disregard of the inflation target pledge. The Keio University Professor forecast that a more possible scenario would be for the Japanese yen to come under pressure against the US dollar.


This event would likely happen as the United States Federal Reserve System raises interest rates while the Bank of Japan keeps interest rates at zero. Shirai remarked that this situation would make the Japanese official currency less attractive.


She stated a widening interest rate gap would provide a good investment peg for currency speculators. Shirai gave her recommendations relating to the measures Japan’s central bank could perform.


She cited that widening the band for 10-year interest rates beyond the present plus or minus 0.25 percent around zero is a more likely option for the Bank of Japan to provide itself with more room for maneuvering market interest rates. 


The Bank of Japan appeared to tranquilize the Asian country’s foreign exchange market last week by recommitting to its loose monetary policy. However, the potential for a wild swing this year is recommended by analysts not to be ruled out. 


Foreign exchange experts confirm the weakening Japanese yen these days. Japan’s official currency fell to a five-year low of 116 yen against the US dollar earlier this month.


Currency strategists and traders believe the Japanese yen could come under renewed pressure as the United States Federal Reserve System commences a tightening campaign to rein in inflation, expanding interest rate differentials between the United States and Japan.


We learned that the Japanese yen’s volatility exhibits the ongoing coronavirus or COVID-19 pandemic. Disparate economic recovery speeds result in divergent monetary policies across economies and necessitate adjustments in the currency markets. We appreciate Keio University Professor Sayuri Shirai’s insights she offered to the Bank of Japan.


We are mindful that a currency’s direction can be notoriously unpredictable. We believe her valuable perspectives can help the central bank drive the Japanese yen forward, preventing it from decreasing its strength and aiding the citizens against feeling inconvenienced by this economic dilemma besides the ongoing global inflation.

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