Federal Reserve Chair Jerome Powell’s stern message at Jackson Hole has made it clear for Bank of Japan Gov. Haruhiko Kuroda that the weaker yen, a major source of concern for Japan’s economy, won’t be going away anytime soon.
The yen fell to a five-week low Monday morning, after Powell warned against prematurely loosening policy in his speech at the Federal Reserve Bank of Kansas City’s Jackson Hole, Wyoming, retreat Friday. With other key central bankers, Powell emphasized his strong resolve to fight inflation, while Kuroda made it clear he’s sticking with monetary easing.
The remarks increased selling pressure on the yen, with more expectations for a wider interest rate differential between Japan and the United States to continue for longer. The development reversed a budding market view in the past few weeks that a slowdown in the pace of U.S. rate hikes would stop the yen’s weakening trend.