Finance

Why Has the Japanese Yen Weakened in Recent Months?

Those who have been around the foreign exchange trading block for a while will no doubt be aware that the Japanese yen has long since had a reputation for being a rock-solid currency. In recent years, it has developed a reputation for being one of the world’s “safe havens,” a currency that investors turned to whenever the going got tough.

However, there has been a range of upsets in recent months as the currency has reached new lows. This blog post will explore why this has happened and examine what the broader context looks like for the currency.

Image source: 123rf.com

What’s happened?

As any forex trader should know, staying on top of the latest forex news using a reputable site like LeapRate is an excellent idea – not least because it can give you the background to interesting developments like this one, the largely unexpected weakening of the formerly “safe haven” Japanese yen.

The yen has suffered from huge dips recently. Charts show that the yen reached its worst position in 24 years this month. This comes against a complicated backdrop of other problems for the Japanese economy, including the Nikkei stock exchange – which was down by 3% at one stage during the day. The index usually performs better when the yen is struggling due to Japan’s large number of exports. The Japanese government is now being called upon to tighten its monetary policy.

The reasons why

The reasons for this are complex, although one is that competition from other currencies has been high. The US dollar has been surging recently, and some investors have been moving away from the yen to get a slice of greenback action. Interest rates have been hiked up in the US due to various problems, including the economic impact of the coronavirus pandemic – with policymakers looking to encourage investors and spenders to behave in certain ways. The knock-on effect for the dollar has been to rise in value.

Another reason for the yen’s problems is that the aforementioned monetary policy in Japan has been loosened to a great degree in recent times. Unlike many other central banks, the Bank of Japan decided in April this year to keep low-interest rates in place. Short-term interest rates in the country still sit at -0.1%, which is almost unheard of elsewhere in the world. That arguably has positive effects in other ways, but it’s not great news for the currency. It even appears that the Bank of Japan may stick to this plan no matter what happens to inflation – news which could fill yen investors with horror.

In sum, the Japanese yen has clearly suffered in recent times. The currency has plummeted to its worst performance in 20 years and has lost out mainly to the US dollar – despite its previous status as a “safe haven.” As this article has shown, there has been a whole host of reasons for this – and investors need to make sure they know the reasons why.

Clyde K. Valle

Clyde is a business graduate interested in writing about latest news in politics and business. He enjoys writing and is about to publish his first book. He’s a pet lover and likes to spend time with family. When the time allows he likes to go fishing waiting for the muse to come.

Recent Posts

Donald Trump and Elon Musk Celebrate Election Victory at UFC 309

Image source: Wikimedia Commons President-elect Donald Trump celebrated his election victory at the Ultimate Fighting…

4 days ago

White House 2024: Donald Trump Wins, Kamala Harris Calls Him to Concede Election

Millions of voters across the US chose to return Donald Trump to the White House…

2 weeks ago

Who Won? Donald Trump Declares Victory as He Addresses Jubilant Supporters in Florida

Donald Trump declares victory in the US election as he addresses jubilant supporters in Florida.…

2 weeks ago

Stocks Soaring as Donald Trump Closes in on US Victory

Stocks around the world are rising as Donald Trump appears to be on the cusp…

2 weeks ago

Who Won? Kamala Harris Cancels Election Night Party as Path to Victory Narrows

Donald Trump has won Pennsylvania, North Carolina and Georgia and taken a lead over Kamala…

2 weeks ago

Quincy Jones Dead at 91

Quincy Jones, the celebrated musician and producer who worked with Michael Jackson, Frank Sinatra, Ray…

2 weeks ago