Kiuchi Warns: Pass-Through of Rising Costs Limited for Japanese Yen

The Japanese Yen's value is influenced by various factors, including the performance of the Japanese economy and the Bank of Japan's policy. According to Economy Minister Kiuchi, the pass-through of rising costs has been limited so far.

The Bank of Japan's ultra-loose monetary policy between 2013 and 2024 led to a depreciation of the Yen against its major currency peers due to increasing policy divergence with other central banks. However, with the gradual unwinding of this policy, the Yen has seen some support.

The widening policy divergence between the Bank of Japan and other central banks, particularly with the US Federal Reserve, supported a differential between 10-year US and Japanese bonds that favored the US Dollar against the Yen. But with interest-rate cuts in major central banks and the BoJ's decision to abandon ultra-loose policy, this differential is narrowing.

The Japanese Yen is often seen as a safe-haven investment, meaning investors tend to put their money in it during turbulent times due to its supposed reliability and stability.