On March 27, the Japanese yen (JPY) fell to a 34-year low of 1 USD for 152 JPY in Tokyo. The reason was that the Bank of Japan (BOJ) maintained interest rates at 0%.
BOJ board member Naoki Tamura said short-term interest rates will remain near zero for now, Kyodo reported, citing the BOJ's end of negative interest rates last week.
Japan will react "firmly" to the yen's excessive weakness after the currency fell to a 34-year low, according to Japanese Finance Minister Shunichi Suzuki.
Mr. Suzuki said the BOJ would take appropriate actions, not ruling out any options, to deal with excessive fluctuations in the currency market, and affirmed that it would closely monitor market developments with a “high sense of urgency.”
Although the BOJ ended negative interest rates last week, this action was not enough to support the JPY. The last time the JPY depreciated to 151.94 against the USD was in October 2022, after which the Japanese government intervened in the foreign exchange market to support the JPY to avoid further depreciation.
Investors sold JPY for USD as the wide interest rate differential between Japan and the US further weakened the JPY.
The US Federal Reserve (FED) kept its key interest rate unchanged at its policy meeting earlier this month, but is expected to make three rate cuts by the end of the year. As such, the USD/JPY exchange rate will continue to fluctuate in the coming time. It is forecasted that the JPY may fall further to 1USD = 154 – 158 JPY. In the event of strong intervention by the BOJ, the USD/JPY may quickly return to 1USD = 140 JPY.
KHANH MINH
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