The yen slipped above 150 yen against the dollar for the first time in more than three decades as investors remain wary of further intervention by the Japanese authorities to support the currency.
The yen fell as much as 0.1 percent on Thursday to 150.08 yen per dollar, pushing the Japanese currency to its lowest level since August 1990.
The latest drop came when the Bank of Japan announced it would launch an emergency bond-buying operation, offering to buy 250 billion yen (US$1.7 billion) worth of government bonds to keep yields stable even as global long-term yields rose to hold interest rates.
Despite a $20 billion intervention in September, the yen has lost more than 23 percent of its value against the dollar year-to-date as the gap between the BoJ’s ultra-loose monetary policy and tightening by most other major central banks widens.
Traders have speculated that the authorities subtly intervened to strengthen the yen last week, but there was no announced intervention after September’s action.
Comments by BoJ Governor Haruhiko Kuroda last month signaling that interest rates would remain low helped push the yen above the 145.90 yen-per-dollar level and prompted the first intervention by Japanese authorities since 1998 .
With $1.2 trillion in foreign exchange reserves at the end of September, Japan could implement additional interventions, but analysts have warned that such measures will not be effective in containing depreciation as long as interest rate differentials between Japan and the rest of the world continue to widen.
“If you look at the interest rate differential between the US and Japan, the yen could be trading at ¥155 [per dollar] But the most important thing for the authorities is to slow the pace of depreciation to keep it around 150 yen,” said Kenta Tadaide, a senior foreign exchange strategist at Daiwa Securities.
He added that the government will have to buy time until early next year when the US Federal Reserve is expected to stop raising interest rates.
Despite increases in imported food and energy prices, inflation in Japan has remained relatively low compared to the US and Europe. Core inflation excluding volatile food prices is expected to have hit 3 percent in September with data due for release on Friday, up from 2.8 percent in August. But the BoJ has argued that interest rates would drop to less than 2 percent next year and underlying demand in the economy remains too weak for the central bank to tighten monetary policy.
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In a recent interview with the Financial Times, Japan’s Prime Minister Fumio Kishida said the central bank must maintain its policy until price hikes lead to rising wages.
Strategists at several investment banks have revised down their short-term forecasts for the yen as it has plummeted. Last week, JPMorgan raised its fourth-quarter estimate for the Japanese currency to 155 yen against the dollar from 147 yen to 155 yen against the dollar, while Goldman Sachs raised its three-month forecast to the same level from 145 yen.
On Wednesday, Naohiko Baba, Japan economist at Goldman Sachs, said he expected the BoJ to “maintain the status quo across all monetary policy parameters” at its upcoming meeting next week.
“The key here, in our view, is the effectiveness of the intervention with the seemingly conflicting policy objectives,” with the BoJ still committed to ultra-loose monetary policy and the Japanese Treasury trying to keep depreciation in check, Baba said.