Bank of Japan ‘playing for time’ as it sticks to ultra-loose policy despite yen plunge, analysts say

Central bank ‘playing for time’ as it looks to slow down weakening of yen until global conditions improve

PM Kishida backs central bank’s yen approach but faces host of other challenges that could make it difficult for him to survive next six months

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Pedestrians walk past a screen displaying the Japanese yen exchange rate against the US dollar in Tokyo on October 13, 2022. The yen fell against the US dollar to reach the upper 146 range. Photo: EPA-EFE/Jiji Press

Published: 8:45am, 14 Oct 2022

The Bank of Japan is sticking to its contrarian ultra-easy monetary policy and “playing for time” despite the yen continuing to test record lows against the US dollar, analysts have said, adding that more intervention in the currency markets by Tokyo is imminent.

The sense is that despite rising prices at home and the spectre of a global recession, which would have significant implications for the world’s third-largest economy, Japan should emerge somewhat better than many other economies when the tide eventually turns for the yen.

While the Japanese currency crisis is unlikely to be sufficient to bring down Prime Minister Fumio Kishida’s government on its own, political analysts point out that he faces other challenges that could mean he is no longer in power to enjoy the fruits of a recovery in the latter half of next year.

Those challenges include the fallout from the widening scandal surrounding the Unification Church and the degree to which it had insinuated itself in the corridors of power before ex-leader Shino Abe was murdered in July.

There are also plenty of hawks in the ruling Liberal Democratic Party agitating for a greater commitment to defence spending and a stronger line on the nation’s regional rivals.

The yen briefly crossed the 147.65 per dollar mark on Thursday, crossing its weakest point since August 1990. The yen was affected by the widely held belief that the US Federal Reserve will confirm in the coming days that it will stick to its monetary tightening policy.

Finance Minister Shunichi Suzuki on Wednesday admitted the ongoing volatile fluctuations in the yen were “extremely concerning” and that Tokyo would take “decisive” measures against rapid changes in the exchange rate.

Bank of Japan Governor Haruhiko Kuroda. Photo: Bloomberg

Bank of Japan ‘playing for time’ as it sticks to ultra-loose policy despite yen plunge, analysts say

Central bank ‘playing for time’ as it looks to slow down weakening of yen until global conditions improve PM Kishida backs central bank’s yen approach but faces host of other challenges that could make it difficult for him to survive next six months

Central bank ‘playing for time’ as it looks to slow down weakening of yen until global conditions improve

PM Kishida backs central bank’s yen approach but faces host of other challenges that could make it difficult for him to survive next six months