Yen Weakness Persists Despite 31-Year High Interest Rate

The yen's recent weakness is puzzling investors after the Bank of Japan raised its policy rate to 1.25%, the highest level in 31 years.

Despite the increase, the yen did not appreciate as expected and continued to depreciate against the US dollar.

The reason behind this unusual market move lies in Japan's weak economic fundamentals and the central bank's limited room to raise interest rates further.

The economy is showing signs of a slowdown, with both headline and core inflation falling short of market expectations.

Japanese household consumption has declined for eight consecutive months, and the central bank is constrained from raising interest rates due to economic weakness.