Japan’s monetary conundrum — why the yen hit a 40-year low as interest rates hit a 31-year high
- Posted on July 20, 2026
- By Fortune
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- 1 min read
Japan faces an unusual economic paradox where the Bank of Japan raised interest rates to combat inflation, yet the yen simultaneously weakened to its lowest level in four decades. This counterintuitive situation reveals structural economic challenges beyond traditional monetary policy tools. The core issue stems from insufficient money supply circulation throughout the economy, suggesting that rate hikes alone cannot address Japan's fundamental deflationary pressures and currency depreciation concerns without comprehensive structural reforms.
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