(MENAFN) On Monday, the Japanese yen hit its lowest level since April 29 against the US dollar, nearing the significant 160 mark. The last time the yen/dollar exchange rate surpassed the 160 threshold was on April 29, which marked a 34-year low for the currency. This decline has been gradual but steady, with the parity at approximately 158 just last week, reflecting the yen's persistent weakening trend.

Prior to the onset of the COVID-19 pandemic, the yen/dollar parity was much stronger, consistently maintaining a level around 100. However, in the face of global economic challenges, central banks worldwide have been raising interest rates incrementally. These measures aim to curb inflation and stabilize their economies. In stark contrast, the Bank of Japan has continued to uphold its ultra-loose monetary policy. This divergence in monetary policy approaches has been a key factor driving the depreciation of the Japanese yen against the US dollar.

In a significant policy shift, the Bank of Japan ended its era of negative interest rates in March. The bank raised the interest rate from minus 0.1 percent to a modest 0.1 percent, a move aimed at stabilizing the currency and addressing economic imbalances. This change initially resulted in a temporary strengthening of the yen, with the exchange rate dropping from 150 to 146. Despite this adjustment, the yen's value has continued to decline, underscoring the ongoing impact of Japan's relatively lower interest rates compared to those of other major economies.

The Bank of Japan's decision to maintain a more lenient monetary policy, while other major central banks have been tightening theirs, has placed the yen at a disadvantage. This approach has led to the currency's depreciation, as investors seek higher returns available in economies with higher interest rates. The continued weakness of the yen reflects both the domestic monetary policy stance and broader global financial dynamics.

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