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FILE PHOTO: Japanese Yen and U.S. dollar banknotes are seen in this illustration taken March 10, 2023.
How long can Japan prop up the yen?
Japan’s currency slipped to 160 yen to the dollar on Monday, its lowest rate since 1990, triggering a government intervention and threatening Prime Minister Fumio Kishida’s position.
Voters are frustrated by Japan’s high cost of living, but a change in leadership is unlikely to alleviate the pain. The heavily populated island has few fossil fuel reserves, and it must import food and energy from abroad. That means when the yen weakens, ordinary folks see their bills shoot up.
The government employed a short-term fix: selling dollar reserves and buying yen to boost it. But Eurasia Group analyst David Boling says there’s not much to be done about the root of the problem.
“The yen’s weakness is being driven by the interest rate differential between the US, which has high interest rates and high bond yields, and Japan, which is very low,” he says. “Money is moving out of Japan to capture those higher yields.”
It might be another nail in the coffin for the PM, who could be replaced at the Liberal Democratic Party’s leadership conference this September.
“Japan has to have a lower house election by October 2025, and so the members of the LDP will be thinking about electing a leader who can take them through a national contest,” says Boling.
The Graphic Truth: The 20-year euro vs. US dollar race
On Tuesday, the US dollar reached parity with the euro for the first time in 20 years. The euro's recent slump has a lot to do with high energy prices, fears of a looming EU-wide recession, and the European Central Bank dragging its feet on raising interest rates to tame inflation. Over the past two decades, though, 1 euro has consistently been worth more than 1 dollar because ... that's what the forex market decided, regardless of the strength comparison between the two economies. We take a look at how the euro has performed against the dollar since the EU launched the (physical) single currency on Jan. 1, 2002.
The Graphic Truth: Russia's forex war chest
He prepared for a standoff with the West. President Vladimir Putin has built up his country’s foreign currency reserves to the tune of over $640 billion to insulate the Russian economy. It was a solid plan until the US, EU and global partners announced stinging sanctions against Moscow over its invasion of Ukraine. This includes a plan to ban some Russian banks from SWIFT — a global network for payments between banks — as well as sanctioning Russia’s central bank, which will make it hard for the Kremlin to tap into some of the reserves needed to prop up the crashing rouble. We take a look at Russia’s forex war chest since Putin came to power in 2000.