BOJ’s Kuroda Faces Resistance to Faster Monetary Easing

The yen’s effective exchange rate against a basket of currencies was at 77.2 at the end of August, lower than its 10-year average of 92.93 and near a more than two-decade low of 74.91 reached in January. Its nominal rate broke above 110 per dollar last week for the first time since 2008.

Prime Minister Shinzo Abe said yesterday that higher energy prices caused by the depreciation would affect consumers and small businesses, while policy makers in South Korea expressed concern that a weak yen may hurt its exports. Japan’s trade ministry last week unveiled an initiative pressing large businesses to assist small firms to pass on rising input costs.

“There is a stagflation mentality spreading among consumers,” said Tomohisa Fujiki, head of interest-rate strategy in Japan at BNP Paribas SA, referring to a situation of slow growth and rapid inflation. “The BOJ will be reluctant to add stimulus aggressively as some of the negative impacts of a weaker yen start to emerge.”

Bloomberg

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.