Japan's Yen Hits 40-Year Low Despite BOJ's 5 Rate Hikes to 1%
Updated
Updated · Fortune · Jul 20
Japan's Yen Hits 40-Year Low Despite BOJ's 5 Rate Hikes to 1%
3 articles · Updated · Fortune · Jul 20
Summary
The yen has fallen to a 40-year low even after the Bank of Japan lifted its policy rate five times to 1%—its highest level since 1995—undercutting the view that higher rates signal tighter money.
M2 growth has slowed to 2.5%, back near Japan's pre-Covid pace, after peaking at 9.6% during the pandemic when BOJ lending programs helped end deflation and pushed inflation to 4%.
That money-supply slowdown is already feeding through to weaker nominal growth and easing price pressure, with the commentary arguing CPI inflation will keep falling unless broad money growth returns to 5% or more.
The piece says rising Japanese bond yields are lagging indicators of the Covid-era inflation burst and should eventually reverse, challenging Governor Kazuo Ueda's case that wages and import costs will sustain inflation.