On Thursday, the US dollar rose to a level not seen in 24 years versus the Japanese yen after the Japanese central bank maintained its ultra-loose monetary policy.
The dollar soared to as much as 145.28 yen after hearing of the Bank of Japan’s decision before pulling down a little.
This decision extends the gap between Japan and other developed nations, whose central banks are raising interest rates to combat inflation, most notably the US Federal Reserve.
The yen has suffered in recent months as the central bank maintains a ten-year-old policy designed to generate sustained inflation of 2%, a goal that is thought to be essential for reviving the third-largest economy in the world.
The bank announced that it would continue to follow its existing course of action while “striving to attain the price stability target of two percent, as long as is necessary.”
“It will continue expanding the monetary base until the year-on-year rate of increase in the observed CPI exceeds 2 percent and stays above the target in a stable manner.”
The bank stated that it believes Japan’s economy is on the mend, “with the impact of COVID-19 and supply-side limitations receding,” but it issued a warning about the uncertainties posed by rising commodity prices related to the conflict in Ukraine.
Concern over the yen’s sharp fall in Japan has increased the price of imported goods for both consumers and businesses.
Government representatives have insisted they are keeping an eye on the situation and will take appropriate action if necessary, but they haven’t specified what those actions might be or when they may be put into action.
A “rate check,” which is sometimes considered a prelude to currency intervention, was purportedly carried out by the central bank earlier this month.
The move came just after the yen was on the verge of crossing the psychologically important 145 threshold, and news of the operation momentarily gave the Japanese unit a boost.
The central bank reiterated on Thursday that “it is vital to pay due attention to developments in financial and foreign exchange markets and their influence on Japan’s economic activity and prices” as it has dropped significantly from around 115 in March.
