Yen Slides Despite Record-High Interest Rates

Japan's rate hikes have failed to strengthen its currency despite reaching their highest level in 31 years. The yen remains weak, and the Bank of Japan is under pressure to tighten further.

The U.S. Federal Reserve's recent tightening has kept the interest-rate differential between Japan and the United States from narrowing, limiting the support for the yen. Higher government spending and reduced bond purchases by the Bank of Japan are also expected to leave the market with more government debt to absorb.

Reuters reported that uncertainty over where Japanese interest rates will ultimately peak is holding back a rapid repatriation of capital. Markets had initially expected the end of Japan's long-standing negative-rate policy and the start of rate hikes to bring substantial amounts of Japanese capital invested abroad back home.