Final Newsletter of 2025 - N°84

In Japan, persistent inflationary pressures have pushed the Bank of Japan to take a decisive step.

The central bank raised its benchmark interest rate to 0.75%, its highest level in more than three decades, marginally narrowing the gap with European and American rates. This long-awaited normalization failed to halt the yen’s decline. The Japanese currency continued its slide to record-low levels against both the US dollar and the euro, prompting the finance minister to openly hint at a possible market intervention. The impact of this hint on currency markets, however, remained limited: at best, the downward trend merely slowed.

 

Across the sea, South Korea is facing a similar predicament. The Ministry of Economy and Finance has mentioned a potential “demonstration” of its “strong commitment” to stabilizing the won, which has emerged as the weakest-performing Asian currency against the dollar in the second half of the year. The underlying economic structure is notably different from the past. With a significant share of manufacturing capacity having moved offshore over recent years, a weaker won no longer delivers the same export-boosting benefits it once did.

 

China, meanwhile, is watching its currency from a different angle altogether, more… digital. The People’s Bank of China has announced a new series of measures aimed at accelerating the internationalization of the digital yuan (e-CNY). These initiatives are designed to encourage cross-border payments and overseas usage of the digital form of China’s sovereign currency. While the e-CNY has been gradually deployed domestically since 2020, this latest push reflects a broader strategic ambition amid the China-US trade war.