The Japanese yen has fallen to a minimum in 24 years

The Japanese yen collapsed to its lowest level since August 18, 1998 – 146.68 yen per dollar.

The yen has fallen to a new low in 24 years amid a widening gap in the monetary policy of the United States and Japan. As it’s known, the US Federal Reserve continues to aggressively raise rates to combat inflation, and the Bank of Japan still keeps them at a minimum level (minus 0.1%) to stimulate the country's economy. 

This difference encourages investors to choose dollar assets (from money market instruments to fixed income securities), whose profitability is more attractive compared to Japanese ones. In total, since the beginning of the year, Japan's currency has depreciated against the dollar by about 27%. At the same time, the dollar index increased today to 113.49 points.

At the end of September, the Central Bank of Japan conducted a currency intervention in the market for the first time since 1998, trying to stop the collapse of the yen against the dollar. Then the currency reached a low at around 145.9 yen per dollar (September 22). Japan's finance ministry spent about 2.84 trillion yen ($19.6 billion) in September to stop the yen from collapsing. These steps led to a short-term strengthening of the position of the Japanese currency to 140 yen per dollar.

However, it is worth noting that, despite the efforts of the Japanese authorities, the Bank of Japan's soft monetary policy continues to put pressure on the yen. Moreover, businesses are warning about the negative impact on the domestic economy, and households are preparing for a cost-of-living crisis if inflation starts to rise.