A recent display in Tokyo showed the Japanese currency trading at 156 yen against the dollar on April 26, marking a fresh low in 34 years due to the Bank of Japan's decision to keep its current monetary policy after a two-day meeting. The BOJ announced that it would maintain the uncollateralized overnight call rate at a range of between 0.0 and 0.1 percent, causing a stir in the foreign exchange market as investors anticipated minimal narrowing of interest rate differences between Japan and the United States.
During the Tokyo foreign exchange trading on the same day, the Japanese yen reached the 156 yen mark against the dollar, its weakest level since 1990, following the BOJ's monetary policy announcement. Governor Kazuo Ueda stated in a news conference that the impact of the yen's depreciation on inflation rates hasn't been significant so far, although he highlighted the need for continuous monitoring to determine if adjustments in monetary policy are necessary in response to the yen's decline. At the press conference, Ueda didn't provide a clear warning against the yen's weakening, causing the currency to slip further to 156.80 yen against the dollar.
In a notable shift in March, the BOJ ended its negative interest rate policy and raised rates for the first time in 17 years, moving away from the ultra-loose monetary policies that had been in place for over a decade. Governor Ueda hinted at the possibility of a further rate increase to enhance the likelihood of achieving the 2 percent price stability target. The BOJ's report released on April 26 projected an inflation rate of around 2 percent for five consecutive years through fiscal 2026, while revising the forecasts for fiscal 2024 and fiscal 2025 upwards.
Investors have been on high alert for potential foreign exchange market interventions to support the Japanese currency in recent weeks. The Finance Ministry and the BOJ last intervened in the market in September 2022 when the yen dropped to 145.90 yen against the dollar, marking Japan's first dollar-selling, yen-buying intervention in 24 years.