The Japanese yen has weakened again to 160 yen per dollar, barely a month after the government spent billions on a massive intervention to support it. This decline makes imports of food and energy more expensive, directly hitting citizens' wallets. Analysts anticipate a new official intervention, but in the meantime, prices continue to rise and purchasing power is shrinking for the population.
Technical interventions: the limits of the Bank of Japan's tools 💸
Japanese financial authorities use the sale of dollar reserves to buy yen and curb depreciation. However, this strategy has a limit: reserves are not infinite. Furthermore, the Bank of Japan maintains ultra-low interest rates, which contrasts with hikes in the U.S. and Europe, encouraging investors to seek returns in dollars. As long as monetary policy is not adjusted, any intervention will be a temporary patch, not a structural solution.
The yen and the shopping basket: a drama with wasabi 🍣
With the yen falling, sushi is not what it used to be. Now, buying imported salmon costs almost as much as a trip to Tokyo. Japanese people look at their supermarket receipt and think that perhaps the government should also intervene in the price of tofu. While speculators celebrate, the average citizen calculates whether they can afford rice or if it's time to take out a loan for wasabi.