The Value of the Yen Hits Lowest in 33 Years... Japan Likely to Revise Currency Policy

Nikkei-Dollar Exchange Rate Fluctuates Around 150 Yen
10-Year Government Bond Yield Approaches 1%

The yen-dollar exchange rate surged to 150.26 yen, causing the yen's value to fall to its lowest level in 33 years. Amid this unprecedented yen depreciation and rising government bond yields, expectations are growing that the Bank of Japan (BOJ) will revise its easing policy at this month's monetary policy meeting.

Bank of Japan
Photo by Reuters·Yonhap News

At around 5:30 a.m. on the 26th in the New York foreign exchange market, the yen's value against the dollar dropped to 150.28 yen. This is the lowest level since August 1990, when the yen's value against the dollar fell to 150.87 yen. Since then, the yen-dollar exchange rate has fluctuated slightly, falling to 150.08 yen as of 9:27 a.m., but it still remains in the 150 yen range.

The rise in U.S. bond yields has widened the interest rate gap between the U.S. and Japan, which is analyzed as the cause of the yen's depreciation. On this day, the U.S. 10-year Treasury yield, a long-term bond yield indicator, jumped 0.13 percentage points from the previous day to 4.95%.

Breaking 150 Yen, Government Bond Yield Nears 1%... BOJ Discusses YCC Revision

Due to the yen's value falling relentlessly, some speculate that the BOJ may partially revise its monetary easing policy at this month's monetary policy meeting. Since the BOJ has traditionally viewed the 150 yen level in the yen-dollar exchange rate as a defense line and intervened in the foreign exchange market, it is analyzed that the BOJ will devise countermeasures following the breach of this psychological support level.

The fact that Japan's 10-year government bond yield is approaching 1% is also considered a point where the BOJ is expected to revise its policy. On this day, the yield stood at 0.879%.

In July, the BOJ announced that it would maintain the upper limit of government bond yields at 0.5% but would tolerate yield increases up to 1% depending on market movements. This means that once the yield exceeds 1%, the BOJ will purchase government bonds without limit. However, the market has effectively accepted the yield rising to 1%, and government bond yields have surpassed 0.5% and continued to soar daily. Since the BOJ currently holds 53% of Japanese government bonds, it is difficult for the BOJ to indiscriminately purchase bonds to lower yields.

The Nihon Keizai Shimbun reported that discussions are underway within the BOJ about whether to revise the Yield Curve Control (YCC) policy this month. According to sources related to the BOJ, options mainly being discussed include abolishing the 0.5% upper limit on government bond yields or raising the 1% yield ceiling at which bond purchases begin.

However, there are also voices within the BOJ cautioning against policy revisions while the extent of future U.S. interest rate hikes remains uncertain. The Nihon Keizai Shimbun stated, "Within the BOJ, there are views that the trends in U.S. benchmark interest rates cannot be reasonably explained," and "some point out that revising the YCC amid uncertainty about U.S. rates would be akin to pulling the trigger on a rise in Japanese government bond yields."

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