Bank of Japan Yen: A Look at Historical Events and Monetary Policy

The Bank of Japan has a long history of influencing the value of the yen. The bank's monetary policy has been a key driver of the yen's fluctuations over the years.

In the 1980s, the Bank of Japan's monetary policy helped fuel a period of rapid economic growth, known as the "Japanese asset price bubble." This period saw the yen's value surge to an all-time high.

The bank's policy of keeping interest rates low and injecting liquidity into the economy contributed to the bubble's growth. This period was marked by rapid increases in asset prices, including stocks and real estate.

The burst of the asset price bubble in the early 1990s had a significant impact on the yen's value, leading to a sharp decline.

Discover more: Japanese Yen Currency Value

The Bank of Japan's intervention in the currency market is a crucial aspect of its monetary policy. It typically acts as the agent for the Ministry of Finance when deciding to intervene.

The Bank of Japan has intervened in the currency market on several occasions, including in 2022 when it bought yen to defend its value. This was in response to the yen's sharp decline on expectations that the BOJ would keep interest rates ultra-low.

The decision to intervene is highly political, as Japan's reliance on exports makes the public sensitive to yen moves. Japanese authorities have historically intervened to prevent the yen from strengthening too much, as a strong yen hurts the export-reliant economy.

FX intervention looks likely, especially after the recent FOMC meeting where USD/JPY pushed well above 155 on unchanged rates from the BoJ.

The dollar backdrop is expected to stay strong for the near and medium term, which suggests USD/JPY will explore levels where the BoJ has sold close to $100bn of FX reserves this year – in the 158/160 region.

Japanese authorities may be doing battle with USD/JPY at 160 for the majority of 2025, as the prospect of still higher US yields and a hesitant BoJ suggests a strong dollar is on the horizon.

A unique perspective: Japan Yen to Hk Dollar

The yen is considered the most undervalued currency in the G10 space, which could lead to further intervention by Japanese authorities to support its value.

Historically, Japan intervened to prevent the yen from strengthening too much, but in 2022, Tokyo stepped in and bought yen to defend its value after the currency plunged on expectations that the BOJ would keep interest rates ultra-low.

Japanese authorities typically do not confirm whether they intervened in the currency market, and say only that they would take appropriate action as needed against excessively volatile foreign exchange moves.

Check this out: Russian Foreign Currency Reserves

The yen's decline can be attributed to several factors. One major reason is the large gap between U.S. and Japanese interest rates, which kept the yen less attractive compared to the dollar.

The U.S. Federal Reserve's aggressive interest rate rises played a significant role in this disparity. Meanwhile, the Bank of Japan's (BOJ) slow pace in normalizing monetary policy exacerbated the situation.

Japan's increased imports of fuel and raw materials have also contributed to the yen's decline. Companies are converting yen into foreign currencies to make payments, reducing demand for the yen.

Many big Japanese manufacturers that shifted production overseas have reinvested profits abroad, further reducing demand for the yen. This has had a significant impact on the currency's value.

Consider reading: Demand Deposit vs Checking Account

The Japanese yen is a key factor influencing the Bank of Japan's decisions, with many analysts highlighting its importance. The yen's value is expected to average 147.4 against the US dollar by the end of 2025, according to a CNBC survey of 24 analysts.

A stronger US dollar could weigh on the yen and accelerate the BOJ's policy normalization process, while a weaker yen within limits supports Japan's reflation efforts. This complex dynamic is making it challenging for investors to predict the BOJ's next move.

Accelerated yen depreciation could upset the public and the federal government, forcing the BOJ to adopt a more aggressive stance on hiking, said Kazuo Momma, executive economist at Mizuho Research. This would likely lead to a more rapid increase in interest rates.

Related reading: Japanese Yen against Dollar

A weak yen pushes up the cost of importing fuel, food, and raw materials, hurting retailers and households through higher living costs. This has been a concern for the BOJ, which has seen core inflation, excluding fresh-food prices, exceed its 2% target for the past 27 months.

A weak yen, however, is not all bad for Japan's economy. The yen's decline has benefited Japanese export firms by inflating the yen-based profits they earned overseas, leading to higher wages and boosting consumption.

The yen's resurgence from a five-month low is backed by the BOJ's hints about a potential interest rate hike, while the US dollar's growth may have reached a plateau. This shift in currency strength reflects broader global economic trends, including Japan's potential policy shifts and US political developments.

See what others are reading: Us Bank New Credit Card

The Bank of Japan has a rich history that dates back to 1882, when it was established as a central bank to manage the country's finances.

In the 1960s, the Bank of Japan implemented a policy of monetary easing to combat deflation and stimulate economic growth. This policy helped Japan's economy experience rapid growth and became a model for other countries.

The Bank of Japan has also played a crucial role in shaping the country's currency, the yen, which was introduced in 1871 as a replacement for the Japanese currency of the Edo period.

In 1991-1992, the Bank of Japan (BOJ) intervened to support the yen, selling dollars. This move had a significant impact on the currency market.

The BOJ's actions were a response to a decline in the yen's value, which was affecting Japan's economy. The BOJ sold dollars to buy yen, effectively increasing the supply of yen and reducing its value relative to the dollar.

By intervening in the currency market, the BOJ aimed to stabilize the yen and prevent further depreciation. This move helped to mitigate the negative effects of a weak yen on Japan's economy.

In 1997-1998, the Asian financial crisis had a significant impact on the yen. The currency was pummeled, leading to a decline in value.

The Bank of Japan, also known as the BOJ, intervened to support the yen. This intervention was a response to the currency's decline.

The BOJ's actions were likely aimed at stabilizing the currency and preventing further decline.

In October and November 2011, the BOJ sold yen, just before a massive monetary expansion. This move had significant implications for the Japanese economy.

The BOJ's decision to sell yen was a key factor in the subsequent monetary expansion. This expansion helped to stimulate the economy, but its effects were far-reaching.

In 2011, the BOJ's actions were a major departure from its previous policies. The bank's shift towards more aggressive monetary expansion marked a significant turning point in its approach to economic management.

The BOJ's decision to sell yen was a bold move that had a lasting impact on the Japanese economy.

In September and October 2022, the Japanese economy experienced a significant event.

The yen, Japan's currency, neared a record low of 152 against the US dollar, prompting intervention from the Japanese government.

This drastic drop in the yen's value led to a sharp increase in the cost of imports for Japan, which could have had far-reaching consequences for the economy.

The Bank of Japan (BOJ) responded by raising interest rates to 0.25%, a move that was intended to stabilize the yen and prevent further decline.

The yen strengthened sharply in the subsequent days following the BOJ's decision, a positive outcome for the Japanese economy.

On July 31, 2024, the BOJ raised the interest rate to 0.25%.

The yen strengthened sharply in subsequent days after the rate increase.

For another approach, see: Annual Percentage Yield vs Interest Rate