On the morning of June 30, the yen exchange rate in the Tokyo foreign exchange market declined, with the yen losing value to the range of 162 to 162.5 yen per US dollar.
The Japanese media reported that the yen exchange rate has fallen to its lowest level since December 1986.
Reports and analyses suggest that expectations of a interest rate hike by the Bank of Japan have weakened, and the market has become aware of the differential between Japanese and US interest rates. Fears among investors about government and central bank intervention in currency markets have increased. The continuous depreciation of the yen may drive up the import prices of food and energy, thereby increasing the financial burden on families.
Foreign exchange brokers believe that the yen’s depreciation against the US dollar to the 162 range may accelerate the yen’s downward trend.
Bloomberg described the Japanese yen as experiencing a “historically significant drop”, stating that this phenomenon caused unease in Japan. The last time the yen fell this severely was when the United States, Japan, Britain, France, and Germany signed the “Plaza Agreement” in September 1985. Since then, the yen’s exchange rate has continued to rise.
Bloomberg mapping
Bloomberg reports that as the Japanese yen weakens, the cost of imports in Japan is rising, especially the transportation costs of oil and natural gas measured in dollars. The resulting inflation is harming consumers, with prices of all goods and services, from food to electricity, increasing. Analysts believe this could weaken the support rate of the government led by Yukio Hatoyama.
"The focus now lies in whether the Japanese government will take concrete intervention measures or only issue stronger verbal warnings."
According to Kyodo News, on the 30th, Japanese Finance Minister Yamauga Tsuneko stated after a cabinet meeting that Japan would respond appropriately to the depreciation of the yen as needed, thereby restricting market movements. The report suggests that Yamauga implied an intention to intervene in the foreign exchange market.
