The yen fell against the dollar on Thursday as the Bank of Japan left borrowing costs unchanged and warned of uncertainty over the economic policies of US president-elect Donald Trump.
Japan鈥檚聽currency聽slid past 156 yen per dollar, extending a retreat that began Wednesday when the Federal Reserve forecast it would make fewer interest rate cuts.
BoJ governor Kazuo Ueda told reporters after its announcement that officials would hike interest rates if prices and the Japanese聽economy聽develop as they expect.
But he warned that 鈥榰ncertainty surrounding economic policies by the upcoming聽(Trump) administration is high, so I believe we will need to size up the possible effect鈥�.
鈥楾he upcoming administration鈥檚 financial, trade and immigration policies have the potential not only to affect the US聽economy聽and prices but also significantly impact the global聽economy鈥� and financial markets, Ueda said.
Trump is due to return to the White House next month, having won election in November after pledging on the campaign trail to impose stiff tariffs on imports, sparking trade war fears.
Earlier in the day, the bank said it would keep interest rates at around 0.25 per cent, holding back on what would have been its third hike this year.
The yen passed the 156 level as Ueda spoke, compared with 153.66 on Wednesday morning.
The yen has cratered from its early 2022 levels of around 115 per dollar, before Russia鈥檚 invasion of Ukraine.
That is due in part to a mismatch between the Bank of Japan鈥檚 low interest rates to support the聽economy聽while other central banks including the Fed tightened monetary policy, which they are now unwinding.
The US central bank on Wednesday cut rates by a quarter point but signalled a slower pace of easing ahead owing to sticky inflation and uncertainty over Trump鈥檚 plans.
Analysts said BoJ policymakers were waiting for a clearer picture to emerge of next year鈥檚 wage increases before announcing another interest rate rise.
Political factors were also at play after the government passed an extra budget worth nearly 14 trillion yen ($90 billion) to help pay for a massive economic stimulus package.
It includes handouts for low-income households, fuel and energy subsidies and assistance for small businesses.
Prime minister Shigeru Ishiba is hoping the funds will lift the聽economy聽but also boost his popularity after the ruling coalition鈥檚 worst election result in 15 years.
鈥楢s the minority government is discussing budget and tax reforms involving the opposition... it would be bad timing for the BoJ to hike its rate鈥� as it could drag on the聽economy, Tsuyoshi Ueno, senior economist at NLI Research Institute, told AFP ahead of Thursday鈥檚 decision.
Japan鈥檚 gross domestic product slowed in July-September, partly because of a fierce typhoon and warnings to be prepared for a major earthquake, which did not happen.
Shotaro Kugo, senior economist at Daiwa Institute of Research, said the group was expecting a January rate hike by the BoJ.
鈥業f you consider the risks connected to... Trump, it would be better for the BoJ to wait until January or even March, to have more information about Trump鈥檚 policies,鈥� he said.