Even with Japan’s Interest Rate Increase, Yen-Dollar Exchange Rate Reaches Four-Month High.

Up 0.4% from the previous day at 151 yen to the dollar, the yen continues to slide on concerns about further interest rate hikes;

Although Japan raised its benchmark interest rate for the first time in 17 years, the yen-dollar exchange rate rose to its highest level this year. This means that the value of the yen has fallen so much.

On the foreign exchange market, the yen-dollar exchange rate traded at 151.53 yen per dollar on the 20th, up more than 0.4% from the previous day. It breached the 150 yen level, the psychological Maginot line of a weak yen, a day before the Bank of Japan, the central bank of Japan, raised interest rates, then topped 151 yen today to hit a four-month high. since last November.

The financial market pays attention to the words of Kazuo Ueda, the head of the Bank of Japan, the previous day. “The comfortable financial environment will continue for now.” This means that Japan's consumer price inflation rate is stable at around 2% compared to a year ago, so it will be extremely cautious about raising additional interest rates. The view of Japan's financial authorities is that they have just ended abnormal monetary policy as a way to escape deflation (falling prices in an economic downturn) and that there is no urgency to raise interest rates.

The value of the dollar is also boosted by speculations that the US Federal Reserve will lower interest rates than expected. With the interest rate differential between the US and Japan widening by more than 5 percentage points, Japan's hike in short-term interest rates to 0.1% is not expected to affect the value of the yen.

Japan's government is considering a formal declaration of an escape from deflation, 23 years after it admitted the economy was in recession and in “mild deflation” in the government's monthly economic report in March 2001. However, since it is still difficult to see a complete economic recovery, we plan to focus for now on identifying trends in economic indicators such as rising prices and wages.

Japanese Prime Minister Fumio Kishida has expressed a cautious stance on declaring an escape from deflation, saying:

Tokyo = Correspondent Lee Sang-hun sanghun@donga.com

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