BoJ Policy Shift Supports Japan's Yen Amid Reduced Intervention Fears
Japan's economy and currency are closely tied to the actions of its central bank, the Bank of Japan (BoJ). The BoJ has a mandate for currency control, which means its moves have a significant impact on the value of the Japanese Yen. In the past, the BoJ has intervened in currency markets to lower the value of the Yen, but it does so rarely due to political concerns with major trading partners.
The ultra-loose monetary policy implemented by the BoJ between 2013 and 2024 caused the Yen to depreciate against other currencies. This was partly due to a widening policy divergence between the BoJ and other central banks, particularly the US Federal Reserve. The differential between Japanese and US bond yields also favored the US Dollar over the Yen.
However, in 2024, the BoJ decided to gradually abandon its ultra-loose policy, which has narrowed the interest-rate differential with other major central banks. This change has given some support to the value of the Yen.