The Japanese currency slipped below Wednesday's previous low of 126.3, to mark its weakest level since May 2002, as an overnight rise in U.S. Treasury yields led to market players offloading the perceived safe-haven Japanese currency.
This is caused by the prospect of a widening monetary policy gap as the Fed has started to tighten its policy to combat inflation and has suggested there could be multiple rate hikes this year, whereas the BOJ has maintained its ultra-loose monetary easing policy position underpinned by the bank's overall dovish stance.
Typically, Japanese mainstay exporter firms cheer a weaker yen as it enhances price competitiveness in overseas markets and can see profits augmented when repatriated on favorable exchange rates.
However, a recent surge in energy and commodity prices that resource-poor Japan has to import is hurting companies' balance sheets due to the yen's weakness, which is weighing on consumer spending, market analysts said.
Japan's Finance Minister Shunichi Suzuki told a press conference Friday that the depreciation of the yen could be viewed as "bad" in a situation where material prices have not been fully passed on and wage increases have been insufficient.
On Wednesday, when the yen previously sank versus its U.S. counterpart, Japan's top government spokesperson Chief Cabinet Secretary Hirokazu Matsuno said that such "rapid currency movements are undesirable."
Matsuno added that "Japan will monitor currency market developments, including the yen's recent depreciation, and their impact on the economy with vigilance."
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