Yen Slumps to Multi-Decade Low Amid Fears of Further Rate Hikes

The yen has hit its lowest point since November 1986, trading at 163.99 per dollar.

This decline comes as Japan's economy struggles with deflation and the Bank of Japan (BOJ) faces a delicate balancing act between supporting growth and curbing inflation.

The BOJ's ultra-loose policy was designed to stimulate growth, but the recent plunge in the yen has fueled imported inflation, forcing the central bank to reconsider its stance.

A depreciating currency increases the cost of imported goods, directly stoking inflation. The yen's weakness is driven by jitters over Japan's fiscal situation, rising oil costs, and the growing rate differential with the US.

Barclays economists predict that the BOJ will raise rates next in October, followed by another increase in April, while a Bloomberg survey shows that 50% of economists polled still anticipate the BOJ will hold off until December to raise rates.