Pity Japan’s foreign exchange mandarins. They are struggling to control the plunging value of the yen, intervening in foreign exchange markets for the first time in several years. They succeeded, but that victory is likely to be temporary.
While the yen’s dive has been abetted by speculators, the real causes of the currency’s weakness are structural. Japan’s economy is reliant on foreign energy inputs as those prices skyrocket. Worse, the geopolitical uncertainty that triggered that rise prompts investors to look for safe havens. Today, Japan is not among them.
The country’s currency has been steadily declining in value for some time. Currently, the yen fluctuates between ¥155 and ¥160 to the U.S. dollar, with that latter number thought to be the outer bound of the tolerance of officials at the Ministry of Finance and the Bank of Japan.
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