The Bank of Japan’s refusal to budge and the government’s intervention in currency markets reflect stark differences between that country and the rest of the rich world
Save time by listening to our audio articles as you multitaskThe country has struggled with low inflation, and even deflation, for decades. Its monetary policy has been designed to make financing conditions for companies and households as easy as possible, in an effort to get them to spend. In 2016 theadopted a policy of yield-curve control, which caps 10-year government bond yields at around 0%.
The fall in the currency makes imports more expensive in yen: the country’s import bill rose by 50% in August year on year. Kishida Fumio, the prime minister, has announced support including a 50,000 yen handout for poor families. Kataoka Goushi, an economist until recently on thepolicy board, reckons more co-ordination between monetary and fiscal policy will be needed to soften the impact of the weak yen and to reflate Japan’s economy.
Outside Japan, there may be unexpected consequences to the weak yen. The country is the world’s largest foreign creditor. Its net international investment position—overseas assets held by Japanese owners, minus Japanese assets held by overseas owners—runs to $3.5trn, far north of China’s $1.9trn. This huge pile is the result of decades of high savings.
A weaker currency makes foreign assets worth more when measured in yen. But the gyrating currency also means volatility, making many owners nervous. And the gap in interest rates between Japan and elsewhere makes hedging overseas investments exorbitantly expensive. Perhaps as a result investors have sold 13trn yen in foreign securities so far this year, according to the finance ministry, the most since at least 2005. Thus the falling yen is not only an issue for Japan.
Australia Latest News, Australia Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
XeSS performs worse than native rendering on AMD's Ryzen 7 5700GIntel XeSS isn't the magic bullet for gaming on an integrated GPU unfortunately.
Read more »
Women reflect on how ‘get ready with me’ videos are affecting their self-esteem“When I think about the money and time I’ve wasted on trying to replicate these routines and not being one step closer to the ‘perfect’ one, it makes me so sad – and angry with myself.'
Read more »
'Haas should sign Mick Schumacher because they won't get a Lewis Hamilton'Mick Schumacher is the 'best option' for Haas, reckons Hans-Joachim Stuck - it's not like they have a Lewis Hamilton waiting to sign.
Read more »
Health bosses 'working to manage pressures' after critical incident'I am sorry that it has been necessary to take this step'
Read more »
MI5 tapes can be used in Duffy terrorism trialA judge rejects an attempt to throw out MI5 recordings which are central to the trial of three men accused of terrorism offences
Read more »
Bagnaia “still thinking” about Motegi MotoGP crash a week onDucati’s Francesco Bagnaia admits he comes into this weekend’s MotoGP Thailand Grand Prix “still thinking” about his crash and problems he had last week in Japan.
Read more »