The Japanese yen has been on the decline lately, and some experts are predicting that it could soon break down completely. If this happens, it could have a major impact on the global economy, according to experts such as Kavan Choksi. So far, the Bank of Japan has been unsuccessful in its attempts to halt the currency’s fall. Many investors are now turning to other currencies, such as the US dollar and the euro, as safer investment options. In this article, we’ll take a closer look at the current state of the Japanese yen and what could happen if it continues to weaken.
Trending Downward
The Japanese yen has been in a long-term decline since the country embarked on its quantitative easing program in 2013. The program, which is intended to stimulate the economy by increasing the money supply, has been largely successful in its goals. However, it has also resulted in higher inflation, which has eroded the value of the yen. The current level of the yen is the lowest it has been in more than three years, and there is no end in sight to the decline. This is likely to lead to further economic problems for Japan, as imported goods will become more expensive and exports will become less competitive. In addition, the Japanese government may be forced to raise interest rates in order to combat inflation, which could put an end to the quantitative easing program and further damage the economy.
Other Factors
The quantitative easing program is not the only factor that has contributed to the yen’s decline. Here are a few other factors that have played a role:
The Japanese economy is not doing well.
This has led to a lack of confidence in the yen, which has caused investors to sell it off. The struggling Japanese economy has made investors less likely to want to hold the currency. Additionally, interest rates in Japan are currently very low, which makes the yen less attractive to investors.
The US dollar is currently very strong.
The US dollar is currently very strong. This has made the yen relatively weaker in comparison. When the US dollar is strong, it typically means that other currencies are weak. The reason for this is that when the US economy is doing well, investors tend to put their money into dollars. This drives up the demand for dollars, and as a result, the value of the dollar goes up. On the other hand, when the US economy is struggling, investors tend to pull their money out of dollars and into other currencies.
Geopolitical tensions are high.
There is currently a lot of uncertainty in the world, and this has made investors more likely to seek out safe-haven assets, such as gold and the US dollar.
What Could Happen Next?
If the Japanese yen continues to weaken, it could have a major impact on the global economy. A weaker yen makes Japanese exports more competitive, which could lead to higher inflation in other countries. Additionally, a weaker yen makes it more difficult for Japanese companies to repay their US dollar-denominated debt. This could lead to defaults, which could trigger a financial crisis.
At this point, it is impossible to say definitively what will happen to the Japanese yen. However, given the current circumstances, it seems likely that the currency will continue to decline in
