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Economy

Hypothesis that the yen will reach 160 in the coming weeks worries Brazilians in Japan

With the Bank of Japan remaining steadfast in its policy to support the pandemic-affected economy, the yen is falling to historic levels below the 150 mark against the US dollar. This comes despite several warnings from the Japanese monetary authorities about further intervention in the yen buying market.

The reason for this pressure continues to be the bet on the part of market participants regarding the large differences in interest rates between the United States and Japan – where the US Central Bank has been increasing rates at an unprecedented pace to combat possible inflationary spikes.

The disagreement does not appear to be temporary, and despite the fact that Japan's inflation data released on Friday the 21st showed the sharpest increase in over 31 years, of 3,0 percent year-on-year, (well above the target of 2 percent stipulated by the Bank of Japan), there are few expectations in the market regarding changes in current monetary policies.

There appear to be no signs that the US Reserve Bank will halt its monetary adjustment, and the Reserve Bank of Japan remains adamant that inflation in Japan is out of control. This leads currency market experts to believe that there are no signs of a reversal of the current dollar-yen trend.

Some experts say the impact of the weak yen could have both positive and negative results for the Japanese economy. 

While it may hurt consumers inside Japan due to an increase in the cost of imported goods – including items like natural resources, it is also a boon for some companies through the arrival of tourists spending more money.  

A weak yen also boosts Japanese exporters in terms of price competitiveness in the foreign market, as well as the value of repatriated profits.

According to the experts, the government should capitalize on the positive aspects of the weak yen and provide Japanese companies with incentives to move some of their offshore manufacturing bases back to Japan.

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