Total collapse! The effective exchange rate of the Japanese yen hits a new historic low again, and the depreciation trend spreads from the US dollar to the global currency basket.

The overall financial APP noted that while the yen falling to a 40-year low against the US dollar has dominated headlines, a more comprehensive measure of yen strength is sending equally worrying signals to Japan. The Bank of Japan's Nominal Effective Exchange Rate Index - aimed at measuring the performance of the yen against a basket of trade-weighted currencies - has continued to decline this year and hit a new historic low, reflecting the yen weakening against the euro, pound, and several other Asian currencies. On Wednesday, the yen rose from 163.13 yen to the US dollar to 162.69 yen to the US dollar. At the same time, Japan's 2-year government bond yield rose to its highest level since 1995, and the 5-year government bond yield rose to 1.995%. This downward trend highlights that the weakness of the yen has far exceeded its decline against the US dollar, intensifying concerns about import inflation and erosion of Japan's purchasing power. The weakening of the trade-weighted yen has raised import costs from a wider range of trading partners, making the Bank of Japan's efforts to normalize monetary policy more complex without harming economic recovery. Ugo Lancioni, Senior Portfolio Manager at Neuberger, said, "Not only is the actual value of the yen declining against the US dollar, but it is also showing a comprehensive downward trend against a basket of currencies, which may be the root cause of official concerns. More powerful intervention measures may be needed in the future, combined with other means, to achieve thorough effectiveness." With the continued weakness of the yen exacerbating the risk of rising inflation, central bank officials are open to raising interest rates at a pace faster than economists' consensus. The market generally expects the Bank of Japan to stand pat at the upcoming meeting on July 31st, with the next rate hike expected in December. Policymakers raised the benchmark rate to 1% last month, marking a new high in 31 years. Due to significant interest rate differentials, high oil prices, and concerns about Japan's fiscal outlook, the yen has fallen below the 163 level against the US dollar, hitting its lowest level since 1986. Officials intervened in the foreign exchange market with 11.73 trillion yen (719 billion US dollars) from April 28th to May 27th, but failed to prevent the yen from hitting a 40-year low.