Japanese Yen Falls Vs. US Dollar, Kishida Government OKs Event

The Japanese yen witnessed a conspicuous fall in value versus the US dollar, which increased to an over six-year high yesterday, Monday, March 28. This development may be grim for Japan, although policymakers of Prime Minister Fumio Kishida’s Government appear not to be troubled.


We find it interesting to read and share this foreign exchange-related news with our readers, especially those with units of the Japanese yen. We believe this report can help them understand how to deal with their foreign currency this week.


According to the news posted online by the business newspaper The Wall Street Journal, the official currency of the United States was changing hands at approximately 123.93 Japanese yen late yesterday in Tokyo. At the time of writing, US$1 is equivalent to 123.89 Japanese yen, per Xe.com.


Moreover, the US dollar briefly brought over 125 Japanese yen on foreign-exchange markets yesterday and for the first time since August 2015. This incident was compared with around 110 Japanese yen a half-year ago.


The plummeting action of the Japanese yen stems largely from the widening interest rate differential between the United States and Japan. The weak Japanese yen is not completely favorable for the East Asian economic powerhouse as it adds to the gas and oil imports’ burden, which Japan needs US dollars to purchase.


Additionally, unfavorable currency rates and higher oil prices eventually get passed to the Japanese consumers, who pay more for electricity and gasoline. MUFG Bank strategist Takahiro Sekido cited that it would be challenging for the United States to push the US dollar down, even if the world’s largest economy desired to do so.


He explained that this situation is because the world is turning to the United States at this time to substitute for Russian energy. Countries require US dollars to purchase American gas and oil.


Sekido added that the United States does not have a choice but to accept a robust US dollar, at least in the short term. Meanwhile, Japanese policymakers of Prime Minister Kishida’s Government have expressed that, on the whole, they are fine with the currency moves involving their official national currency and that of the United States.


The scenario driving their decision is the fact that a strong US dollar means Japanese manufacturers gain an edge over US competitors and have lower costs in US dollar terms. Apparently, Japan is presently preferring a weaker currency and with an implied acceptance from US officials focused on inflation.


Haruhiko Kuroda is the Governor of Japan’s central bank, the Bank of Japan. At a parliamentary session last Friday, March 25, he cited that there is no modification in the basic structure that a weaker Japanese yen has positive impacts on the country’s economy by pushing up the overall economy and prices.


Japan’s Chief Cabinet Secretary Hirokazu Matsuno remarked yesterday that the Japanese Government has been watching the market closely and that any fast movements are not desirable.


We find the Japanese Government’s current stance on a weak Japanese yen unusual. We understand that if the official Japanese currency does not demonstrate strength versus the US dollar, Americans and people whose currencies are tied to the United States’ official currency are in the catbird seat.


After all, they would get more value for their money, including when they purchase Japan-made products. This scenario is beneficial for the United States, whose consumers are beset by inflation presently running at almost 8 percent.


We think the perspective of the Japanese policymakers who somehow approved a weak Japanese yen is temporary, and they will shift later on and consider their people’s welfare.


After all, a strong US dollar and a weak Japanese yen certainly come with adverse impacts, with Japanese consumers suffering the repercussions.

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