Yen at 40-year low reveals Japan’s deepening monetary policy constraints

While the yen’s latest slide reflects a higher energy import bill and the wide US-Japan interest-rate differential, the currency is likely to remain under pressure unless Japan addresses deeper structural challenges, including persistent fiscal expansion and weak long-term growth. Decades of unconventional monetary easing have also constrained Tokyo’s ability to raise interest rates aggressively to defend the yen without unsettling financial markets. The current weakness is not confined to the dollar alone. Against the British pound, the yen touched a record low of around 219.6 in July, while it has also underperformed the euro, Swiss franc, Australian dollar and New…