Japanese Yen Hits Lowest Value in Almost a Year as Bond Yields Soar

Financial authorities maintain the previous policy.
Japan sees the highest bond yields in a decade.

According to a report from Yonhap News on the 26th, the yen’s value has fallen to its lowest level in nearly a year.

On this day, according to a report from Nihon Keizai Shimbun, the yen/dollar exchange rate rose to 150.48 yen per dollar at one point during the day in the Tokyo foreign exchange market.

As a result, the yen’s value against the U.S. dollar has fallen to its lowest level for the year and the lowest level in almost a year since last October.

Responding to reporters’ questions, Japanese Finance Minister Shunichi Suzuki said, “I am watching the trend with a sense of tension, as per the previous policy.”

The yen/dollar exchange rate also rose to 150.32 yen during trading on the 25th (local time) in the New York foreign exchange market, showing a notable trend of yen weakness.

A currency dealer in Japan assessed that “it does not seem that Japanese authorities have strengthened their checks against the yen’s weakness.”

Previously, the yen/dollar exchange rate also broke through the psychological resistance line of 150 yen per dollar at one point during trading in the U.S. foreign exchange market on the 3rd.

However, it quickly fell to around 147.3 yen immediately after.

At that time, the Japanese authorities showed an ambiguous attitude, neither affirming nor denying whether they had intervened in the foreign exchange market.

The current value of the yen is even lower than when the Japanese government directly intervened in the market for the first time in about 24 years last September, selling dollars and buying yen (145.9 yen per dollar).

Therefore, there is a strong sense of caution in the market that Japanese foreign exchange authorities may again directly intervene.

The recent yen weakness is primarily due to the widening interest rate gap between the two countries as U.S. interest rates rise.

Some in the market are pointing out the possibility that the Bank of Japan may change its monetary easing policy in response to the widening U.S.-Japan interest rate gap at its monetary policy meeting on the 30th to 31st.

The Bank of Japan, which is implementing a large-scale monetary easing policy, maintained a negative short-term interest rate (-0.1%) in July but effectively raised the long-term interest rate cap from the previous 0.5% to 1.0%, making some changes to its monetary policy.

Japan’s market interest rates have increased since this policy change.

The yield on 10-year government bonds, a representative indicator of long-term interest rates in the Tokyo bond market, rose to 0.880% during the day. This is the highest level in about 10 years and 3 months since July 2013.