At the end of September, the Bank of Japan maintained its dovish monetary policy in the face of unexpected government intervention in the currency market, rising inflation, and a dramatic decline in the value of the yen relative to the dollar.

As a consequence, the Japanese government authorized a currency purchasing intervention for the first time in 24 years as soon as the BOJ made its decision since the yen’s decline raced to breach the crucial ¥145 line. The intervention briefly raised the yen’s exchange rate to the ¥140 level.

The Bank of Japan headquarters is seen in Tokyo on September 22, 2022. – The Bank of Japan (BoJ) on September 22 will wind-up a two-day policy meeting and announce its decision later in the day. (Photo by Kazuhiro NOGI / AFP)

Leaders’ statement about Japanese monetary policy

In a hastily scheduled new meeting in the second half of September, Finance Minister Shunichi Suzuki said that, “In principle, exchange rates should be decided in the markets, but we cannot tolerate repeated rapid fluctuations caused by speculative moves.” This statement responded to the question of why the government intervened. Furthermore, Suzuki said the government will closely monitor the situation and will take necessary actions against excessive rate swings.


In addition, the minister also declined to provide details when asked if Japan took out the intervention without working with the United States, stating that Japan has been in continuous contact with foreign currency authorities. He also withheld information on the scope of the intervention, only stating that it had “a certain level of effect” this time.

Parties’ Reaction

In the meantime, the BOJ made the highly anticipated announcement that it will maintain its ultra-loose monetary policy, which includes keeping short-term rates at minus 0.1% and buying Japanese government debt to support the 0.25% cap on 10-year JGB yields.

Prior to the BOJ’s announcement, the U.S. Federal Reserve made its decision to impose a third consecutive rate hike of 75 basis points in an attempt to manage inflation while indicating that it will maintain a hawkish monetary policy for the present. 

Also earlier this month, the European Central Bank increased interest rates by 75 basis points, the largest single increase in its history. Besides, the Swiss National Bank opted to discontinue its negative policy interest rate, leaving the BOJ as the last remaining central bank with a negative rate.

Because of the growing policy divergence between the BOJ and other central banks, the yen’s value has trended downward, although it has fallen by as much as ¥30 this year.

The rapidly depreciating yen has exerted negative impacts on the Japanese economy since it has driven up import expenses on top of already high commodity prices, forcing many businesses to pass those costs on to customers.

This is demonstrated by the fact that, even after discounting the effects of increases in sales taxes, consumer prices in Japan rose at the quickest rate in 31 years in August, at 2.8% year over year, except for fresh food.


The government has increased its alertness and hinted at the prospect of intervening in the currency market as a result of the sharp decline. However, Japan has capitalized on the yen’s devaluation to promote the travel industry. This country, in particular, relaxes border control measures to welcome more foreign tourists, beginning next month (November 2022) with the announcement that inbound travelers from over 70 countries and areas will no longer require visas for tourism.


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