Japanese Yen Weakens to Multi-Decade Low Against US Dollar Amid BOJ Policy Divergence

The Japanese Yen plummeted to a multi-decade low against the US Dollar, breaching the 160.00 mark in Asian trading on Monday. This significant weakening comes as a result of the Bank of Japan’s cautious policy stance and the widening divergence between the Federal Reserve‘s rate outlook and that of the BoJ.

The Yen briefly touched 160.03 against the Dollar, marking its weakest level since April 1990, when it hit 160.15. The currency has been on a downward trend since the BoJ’s decision in March to maintain its current policy.

During a post-meeting press conference, BoJ Governor Kazuo Ueda offered limited insight into the timing of the next rate hike, signaling the central bank’s preparedness to raise borrowing costs later in the year to achieve the inflation target. Ueda also dismissed the possibility of reducing bond purchases.

Amidst this, Japan’s ruling Liberal Democratic Party faced setbacks in the recent by-elections, raising questions about the leadership of Prime Minister Fumio Kishida. These developments have contributed to the sinking confidence in the Yen’s value.

Additionally, the USD gained momentum following the release of the US Personal Consumption Expenditures (PCE) Price Index on Friday, bolstering expectations of prolonged Federal Reserve rate hikes. Markets now turn their focus to the upcoming Nonfarm Payrolls (NFP) report for further insights.