Japan's Finance Minister Katsunobu Kato stated that the country has not yet overcome deflation, despite rising prices. Kato observed that inflationary pressures are increasing, adding to market uncertainty. The USD/JPY currency pair fell slightly following the statement.
Japan 's Finance Minister, Katsunobu Kato , asserted on Thursday that the nation has not yet conquered deflation. He expressed his view that inflationary pressures are steadily mounting as prices continue to ascend. The USD/JPY pair, at press time, is down 0.24% on the day, trading at 152.32. \The Japan ese Yen (JPY) holds a prominent position as one of the world's most actively traded currencies.
Its value is primarily influenced by the performance of the Japanese economy, but more specifically, by the monetary policies of the Bank of Japan (BoJ), the interest rate differential between Japanese and US bonds, and the prevailing risk sentiment among traders, among other factors. The decisions of the BoJ exert a considerable influence on the value of the Yen. One of the BoJ's key mandates is currency control, leading it to take actions that directly impact the Yen. While the BoJ has occasionally intervened in currency markets, typically to curb the Yen's appreciation, it refrains from frequent interventions due to potential political ramifications for its primary trading partners. The BoJ's ultra-loose monetary policy, implemented between 2013 and 2024, resulted in the Yen depreciating against its major currency counterparts. This depreciation stemmed from the widening policy divergence between the BoJ and other leading central banks. More recently, the gradual unwinding of this ultra-loose policy has provided some support to the Yen's value. \The differential between Japanese and US bond yields plays a significant role in shaping the Yen's exchange rate. Over the past decade, the BoJ's adherence to ultra-loose monetary policy has contributed to a widening policy gap with other central banks, particularly the US Federal Reserve. This divergence has fueled an increase in the yield differential between 10-year US and Japanese bonds, favoring the US Dollar against the Japanese Yen. However, the BoJ's 2024 decision to gradually shift away from ultra-loose policy, coupled with interest-rate cuts implemented by other major central banks, has been narrowing this yield differential. Additionally, the Japanese Yen is often perceived as a safe-haven investment. This implies that during periods of market turmoil, investors tend to flock to the Yen as a secure and stable asset. When economic uncertainty prevails, the Yen's value is likely to strengthen against currencies deemed riskier.
JAPAN FINANCE MINISTER KATSUNOBU KATO DEFLATION INFLATION YEN USDJPY BANK OF JAPAN
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