Xinhua News Agency, Tokyo, September 24(International Observation) Maintaining ultra-loose monetary policy, the yen’s decline may not be over yet
Xinhua News Agency reporter Liu Chunyan
The Bank of Japan recently held a monetary policy meeting and decided to continue to implement ultra-loose monetary policy. Analysts pointed out that this decision shows that the Bank of Japan insists on ultra-loose policies to revive the economy. Affected by this, Japan may continue to face problems such as a weakening yen and high inflation.
The Bank of Japan announced on the 22nd that it will continue to implement an ultra-loose monetary policy, maintain short-term interest rates at a level of minus 0.1%, and maintain long-term interest rates at around zero by purchasing long-term government bonds.
Since last year, Japan’s inflation level has been rising due to the sharp increase in the price of imported goods and the continued transmission to downstream. Data from Japan’s Ministry of Internal Affairs and Communications show that Japan’s core consumer price index rose by 3.1% year-on-year in August, maintaining a year-on-year increase of more than 3% for 12 consecutive months.
Bank of Japan Governor Kazuo Ueda said when he took office in April this year that inflation will fall significantly and may fall below 2% in the second half of the year. But at a press conference held on the 22nd, he admitted that Japan’s inflation is currently falling slowly. Ueda said that the central bank is currently not confident that Japan can achieve the 2% inflation target stably and sustainably. This is the fundamental reason why it still needs to maintain ultra-loose monetary policy at this stage.
The Japanese economy is currently facing multiple difficulties: from a domestic perspective, personal consumption is weak and inflation continues; from an international perspective, the Fed’s interest rate hikes have widened the interest rate gap between the United States and Japan. The Japanese yen is under tremendous pressure from continued depreciation, and the Bank of Japan is worried about the negative consequences of the Fed’s interest rate hikes. The spillover effect will drag down the Japanese economy.
Analysts pointed out that the Bank of Japan’s goal is to stabilize domestic prices, so it will not tighten monetary policy in response to the depreciation of the yen, but continued depreciation of the yen is likely to exacerbate price increases and suppress domestic demand. Hayuri Shirai, a professor at Keio University, said that excessive depreciation of the yen has reduced consumer purchasing power, and corporate investment and production have also slowed down.
Hiroshi Fujishiro, chief economist at Japan’s Dai-ichi Life Economic Research Institute, pointed out that the depreciation of the yen is related to the central bank’s maintenance of loose policies. Due to the weakness of Japan’s economy, the central bank cannot make a decision to adopt tightening policies. Even if the Bank of Japan tightens monetary policy and the yen strengthens, Japan’s economic recovery prospects remain uncertain.
As the market predicts that the Federal Reserve may still raise interest rates this year and that the start of interest rate cuts next year will be delayed, the Japanese yen against the U.S. dollar in the Tokyo foreign exchange market has recently fallen into the range of 148 yen per U.S. dollar, a new low since November last year. This level is lower than last September when the Japanese Ministry of Finance took action to stabilize the exchange rate, when the yen-dollar exchange rate was close to 146 to 1.
Shirai pointed out that the Federal Reserve’s continued interest rate hikes and the Bank of Japan’s continued easing policy have caused the yen exchange rate to continue to fall since May this year. Although the current inflation in Japan is cost-push inflation, in the face of excessive depreciation of the yen, the possibility of the central bank making policy adjustments in the next six months still exists.
[Editor in charge: Wu Liang]
2023-09-24 16:02:00
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