The weak yen is helping Japan’s economy recover from the coronavirus pandemic. However, if its exchange rate fluctuates too much against the US dollar, it can harm the economy. This was stated by the Governor of the Bank of Japan, Haruhiko Kuroda.
Weakening of the Japanese yen
The Japanese yen has reached its weakest level against the US dollar in twenty years in recent days. A month ago, the exchange rate was between 115 and 116 yen per dollar, now a dollar is worth about ten yen more. “The recent depreciation of the yen is quite significant and may harm domestic companies and their business,” Kuroda told the Japanese parliament.
According to him, the negative effects of the volatility of the Japanese currency on the local economy should be taken into account. However, Kuroda believes that in principle a weak yen against the dollar is good for the Japanese economy. In fact, it is helping Japan’s post-pandemic recovery by supporting Japanese exports.
Bank of Japan
Kuroda’s warning against too much yen depreciation is in line with Japanese Finance Minister Shunichi Suzuki, who warned that it could lead to too much inflation. Suzuki, however, declined to say whether he would like the Bank of Japan to intervene in favour of the yen if the exchange rate continues its precipitous depreciation.
