Yen depreciates sharply, BOJ maintains ultra-loose monetary policy

(Dan Tri) - The Bank of Japan (BOJ) disappointed investors by continuing to keep interest rates unchanged, causing the yen to plummet in the market.

The Japanese yen continued to depreciate in the trading session on the weekend of October 31. Experts said this was the sharpest monthly decline since July after the BOJ maintained its ultra-loose monetary policy and avoided taking a more hawkish stance on the path of interest rate hikes.

Meanwhile, signals from the US Federal Reserve (Fed) show that there is still uncertainty about an interest rate cut in December, causing the interest rate gap between the two economies to widen further.

As the interest rate differential widens, money tends to shift out of the yen into the dollar or euro in search of higher yields, causing the Japanese currency to depreciate further.

The BOJ kept its policy rate unchanged at 0.5 percent after a two-day policy meeting, while stressing it would continue to raise borrowing costs if the economy develops as expected.

However, investors said this decision was still cautious, as only two members of the council continued to support the interest rate hike, showing that the progress in normalizing monetary policy was very slow.

Japanese Finance Minister Katayama Satsuki said the government is closely monitoring the foreign exchange market with a “high degree of urgency,” helping the yen recover slightly from its initial decline.

In addition, core inflation in Tokyo increased in October and remained above the central bank's 2% target. However, BOJ Governor Kazuo Ueda's cautious comments on the possibility of a rate hike disappointed the market.

Finance Minister Katayama Satsuki (Photo: Japan Times).

This also put pressure on the yen, which fell to its lowest level in more than eight months, hovering around 153.52 yen per dollar as BOJ Governor Kazuo Ueda spoke.

Expert Noel Dixon (State Street Global Markets) said he is still optimistic about the yen despite the BOJ's slow action, because policy normalization is inevitable and forecasts that interest rates may rise to 1% in the near future.

“Wages are already significantly higher than they were, and the government’s expansionary fiscal spending will only reinforce this trend,” said Mr. Dixon.

Earlier, the Fed decided to cut the reference interest rate by another 25 basis points, to 3.75-4%. This decision matched market forecasts and was the second time the agency adjusted monetary policy this year.

However, Chairman Jerome Powell warned investors not to expect further rate cuts in December, as there are still mixed views within the Fed about the pace of policy easing.

Source: https://dantri.com.vn/kinh-doanh/dong-yen-mat-gia-manh-boj-van-giu-chinh-sach-tien-te-sieu-noi-long-20251102114119840.htm