It’s just not what it used to be. The Japanese government has begun to intervene to defend the weak currency | Company

Published by
Peter Kavinsky

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The Bank of Japan recently decided to keep its monetary policy extremely loose and not to raise interest rates yet. She left the short-term target at minus 0.1 percent and the 10-year government bond target at zero. It is the low rates that contribute to the weakening of the exchange rate, especially in a situation where other central banks are raising interest rates in an attempt to combat high inflation.

“We have taken a decisive step (in the foreign exchange markets),” Deputy Finance Minister Masato Kanda, who is responsible for foreign affairs, told reporters. When asked whether this meant intervention, he replied in the affirmative. In such a case, the Ministry of Finance, in conjunction with the central bank, starts selling dollars in huge quantities, creating an artificial demand for the Japanese currency in the market.

Japan is a member of the G7 group of developed countries, but is the only country in this group that has not yet started raising interest rates. For example, the US central bank (Fed) on wednesday it rose for the third time in a row interest rates by 0.75 percentage point, the base rate is now in the range of three to 3.25 percent, which is the maximum in 14 years.

The era of negative interest rates in Europe was ended on Thursday by the Swiss central bank, which raised the base rate by 0.75 points to 0.50 percent. This is the most significant increase during the existence of this monetary authority. Other central banks are also raising rates, including Norwegian, Swedish or Czech. The European Central Bank (ECB) began moving away from its zero-interest rate policy over the summer.

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Peter Kavinsky

Peter Kavinsky is the Executive Editor at cablefreetv.org

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