I have recently wondered about the depreciation of the Japanese Yen against the USD (or any other major currency).

Currently, a thousand Yen is at around USD 7,75. This is about about a twenty-year low. And I am kind of confused why.

I am aware that the US FED has started to raise its interest rate (and the BoJ did not) and is expected to continue to do so. However, the Fed Funds rate right now stands at 1%, while US inflation is at around 8%. Japanese inflation on the other hand is way below 2%.

To me it seems like a bad idea to hold USD at the moment (inflation is much higher than the interest rate) and a somewhat less bad idea to hold Yen (inflation is only somewhat higher than the interest rate). But why is it that the Yen is depreciating so much?

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    $\begingroup$ Does this and this help? $\endgroup$
    – Alex
    May 16, 2022 at 20:14
  • $\begingroup$ Also, the US is a lot stronger in terms of consumer and business spending. Japan has an aging population and just looking at government debt makes you wonder why anyone would want to trust Japan and the Yen (this is obviously simplified). $\endgroup$
    – Alex
    May 16, 2022 at 20:24
  • $\begingroup$ The links helped, thanks! The second point not so much, as neither gov. debt nor the aging population is anything new for Japan. In past crisis the Yen even rose. So I doubt that those two issues suddenly eroded trust. $\endgroup$
    – ArOk
    May 17, 2022 at 16:37


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