BOJ Reaffirms Stimulus Commitment... Yen Falls for 14th Day, Threatening 130 Yen per Dollar

Haruhiko Kuroda, Governor of the Bank of Japan
Photo by Reuters Yonhap News

[Asia Economy Reporter Byunghee Park] The Japanese yen continued its weak trend on the 20th, threatening the 130-yen level against the dollar.

According to Bloomberg News, as of 12:05 PM Korea time on the 20th, the dollar-yen exchange rate stood at 128.7 yen per dollar. Earlier that morning, the yen fell to 129.3 yen per dollar, threatening the 130-yen level. The last time the yen's value dropped to 130 yen per dollar was in 2002.

In the New York foreign exchange market overnight, concerns over U.S. tightening emerged, strengthening the dollar, and this trend is continuing.

The Bank of Japan (BOJ), Japan's central bank, announced the resumption of unlimited government bond purchases on the day, fueling the yen's weakness.

BOJ stated that as the yield on Japan's 10-year government bonds rose to 0.25%, reaching the upper limit of the allowed range, it would resume unlimited bond purchases. This is the first time BOJ has conducted unlimited bond purchases this month.

Earlier, in the last week of March, BOJ also implemented unlimited bond purchases for four days. However, the recent sharp depreciation of the yen has intensified debates over BOJ's monetary policy. In this context, BOJ's announcement of unlimited bond purchases again is seen as a reaffirmation of its strong existing stimulus stance. With confirmation that BOJ has no intention of changing its monetary policy, yen selling continues.

The recent sharp decline in the yen is due to the U.S. shifting its monetary policy direction toward tightening, while Japan maintains its stimulus stance. The Japanese economy has been struggling with prolonged deflation, and accordingly, BOJ has expressed its intention to continue economic stimulus through monetary policy. Regarding the yen's weakness controversy, BOJ Governor Haruhiko Kuroda maintains the position that overall, it is beneficial for the Japanese economy.

On the other hand, the U.S. tightening stance is gaining increasing momentum. James Bullard, President of the Federal Reserve Bank of St. Louis, said in a virtual speech at an event hosted by the U.S. Foreign Relations Committee on the 19th U.S. time that the U.S. benchmark interest rate should be raised to 3.5% by the end of the year and that if necessary, the rate should be increased by 0.75 percentage points at once. The last time the U.S. raised the benchmark interest rate by 0.75 percentage points at once was in 1994. As expectations grow that U.S. tightening could accelerate, the dollar is strengthening.

The decline in the yen's value against the dollar has continued for 14 consecutive days. Bloomberg reported that the yen has been falling for 13 consecutive days as of the previous day, marking the longest decline since 1971.

This content was produced with the assistance of AI translation services.