After updating its 20-year high, USDJPY continues rising. The Japanese Yen remains very weak against the USD. The current quote for the instrument is 126.65. The JPY is mostly pressured by the “greenback” and the US Fed’s monetary policy. Because of high inflation, the American regulator had to tighten its monetary policy, thus supporting the USD. At the same time, Japan is keeping its interest rate negative due to its high debt load and can’t afford to raise the rate quickly. The key moment that Japan has been fighting inflation for many years, that’s why it needs an ultra-soft monetary policy.
They often say that the national debt size doesn’t matter if a country can service it. It’s true but when it comes to Japan, there are nuances relating to the debt size, which is ¼ of the country’s budget. It’s huge money and it would be much better to reduce it than increase it.
This is the reason why the Bank of Japan continues and will continue the QE programme as long as it has to. It means that the regulator’s monetary policy is very unlikely to change in the nearest future and the differences between strategies will continue putting pressure on the JPY.
