Why has the Japanese yen dipped to a three-decade low? There are several factors

Support for the currency follows a years-long slide that even Japan’s first interest rate hike since 2007 and broad optimism about the economy has failed to arrest.

A weaker yen is a boon for Japanese exporters’ profits, and for tourists visiting Japan who find their currencies going further, but it squeezes households by increasing import costs.

Here are some of the reasons for the slide:

Interest rates and momentum are powerful forces in foreign exchange markets. Both are against the yen. The Bank of Japan left short-term Japanese interest rates between 0 and 0.1 per cent in April and did not indicate sharp or sustained rises were coming up ahead.

These deals, known as a “carry trades” are particularly attractive when broader market volatility is relatively low, as it is right now, as the fundamental rate difference can drive the markets.

Short-term US rates are at 5.25-5.5 per cent, and a US rate cut isn’t expected until November or December.

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Japanese monetary authorities mull intervention options after yen drops to 34-year low

Why is the yen falling? Because people are selling it. And why are people selling? Because it is falling. Such can be the self-fulfilling loop of the market mindset.

The yen has been steadily sliding for more than three years and has lost more than one-third of its value since the start of 2021 and few are game to stand in the way.

The trend discourages exporters from converting foreign proceeds into yen. It encourages Japanese financial institutions to invest abroad. And it has been a boon for speculators betting against the yen, who have not been shy.

Speculators’ short-yen positions hit their largest since 2007 in the week ended April 23.

The BOJ’s decision to leave policy unchanged at its April