The Japanese yen continued to drop against the U.S. dollar to a fresh low in 34 years on Friday after sinking below 158 in New York, contributing to consumer woes in the East Asian country.
On Friday, the Bank of Japan (BOJ) decided to keep short-term interest rates between zero to 0.1 percent and continue buying government bonds.
Analysts expect continued yen weakness as the BOJ delays raising rates, further widening the gap with the U.S. dollar and incentivizing yen selling.
The relentless depreciation of the yen has led to persistent inflation for businesses and shoppers in the country. Japanese companies that rely heavily on overseas energy and raw materials have seen their production costs surge, leading to a continuous uptick in the prices of daily necessities.
"Prices of imported food, especially canned food, have been on the rise. The prices in supermarkets have gone up by almost 300 yen (around 2 U.S. dollars). Toilet paper prices are also ticking up and the cheap ones are out of supply," said a Tokyo resident.
Japanese Finance Minister Shunichi Suzuki said on Friday that the government is also worried about the negative impact of the depreciation of the yen as it tries to tackle inflation, stressing that he will closely monitor the foreign exchange market to take countermeasures. He did not comment on whether the yen was over-depreciating.
In March, the BOJ announced an end to eight years of negative interest rates, but only raised the policy rate from minus 0.1 percent to a range between zero to 0.1 percent, while pledging to keep monetary conditions loose.
The tightening fell short of market expectations, exacerbating the yen's depreciation.
Meanwhile, the U.S. Federal Reserve's aggressive interest rate hikes further enlarged the interest rate gap, contributing to the yen's sagging exchange rate.
Responding to the continuous depreciation of the yen and high prices, real estate has been attracting many foreign investors as an asset that can hedge against inflation.
Coupled with rising construction costs and other factors, the average price of a new apartment in central Tokyo's 23 wards exceeded 100 million yen (about 631,532 U.S. dollars) in 2023, a jump of more than 30 percent over the previous year.
Japanese shoppers feel sting as yen slides below 158 to fresh 34-year low against dollar
