Some reckon the yen could continue falling, perhaps to 150 to the dollar, a level unseen even during the Asian financial crisis of 1997-98
reaffirmed that direction, pledging to keep buying ten-year bonds to help control the yield curve. With more money to be made holding American bonds than Japanese ones, investors have snubbed the latter, dampening demand for the yen.
Trade also plays a role in the yen’s woes. Japan’s current-account balance went into the red in December. Rising import costs have been the main culprit: fuel and raw materials make up roughly one-third of Japan’s import bill. In order to buy pricier foreign goods, importers have been forced to sell more yen. Japan’s borders have remained closed to inbound tourism due to thePolicymakers have traditionally seen a weak yen as a positive for Japan and its powerful export-focused industries.
One reason is Japanese firms’ gradual but sustained efforts to mitigate the risks of currency appreciation by offshoring production. “The flip side,” Mr Baba says, “is that they can’t reap as many benefits from depreciation.” The stuff that is still exported from Japan tends to be high-value-added goods, which tend to be less responsive to changes in exchange rates. The pandemic and supply-chain snags have also hampered the export of some of these products, such as automobiles.
. Inside the, some have argued for shortening the target of the yield-curve control policy from ten-year bonds to five-year ones, a form of soft tightening, but that seems unlikely in the remainder of the term of the current governor, Kuroda Haruhiko, which runs until April 2023. A turning point might come when Japan reopens to foreign tourists, as expected following the elections.
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