Fed rate hike could impact U.S.-Japan exchange rates, says Sasakawa USA’s Harris

March 17, 2017

The Federal Reserve’s willingness to raise its benchmark rate on Wednesday “suggests that the U.S. economy is healthier than it has been in years, with robust job creation and rising wages and prices,” Sasakawa USA Fellow Tobias Harris said in a Nishi Nippon Shimbun article on March 17.

“The rate hike is unlikely to cool activity significantly,” he added.


Harris elaborated in the interview that the rate change’s main impact on Japan likely will be in effecting exchange rates, as it will continue the yen’s depreciation against the dollar in the near term, as the spread between U.S. and Japanese rates widens.

“This will help Japan’s big exporters. At the same time, however, the global decline in bond prices will pick up pace, which could complicate the Bank of Japan’s yield curve control program,” Harris said. “It could be increasingly harder for the BOJ to hold long term rates between 0 and 0.10%. Furthermore, Japan has to worry about the wider global impact of a strong dollar, which could trigger a financial crisis in emerging markets.”

In the article, Harris said it is unclear how the Trump administration will take the Fed’s decision.


Read the full Nishi Nippon Shimbun article here (Japanese language only).

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