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The Japanese yen fell to a new 20-year low against the dollar on Wednesday, pushed down by expectations that the Bank of Japan will defy global trends and keep monetary policy loose.

The yen dropped as much as 1.4 per cent against the US currency, taking it past ¥134 per dollar. It has declined roughly 4 per cent this month and has in recent days neared its weakest level since early 2002.

The move came after the governor of the BoJ said that consumers had become “more tolerant” of price rises, comments that he later retracted. Speaking at the FT’s Global Boardroom event, Haruhiko Kuroda said that a weakening yen would boost the profits of Japanese companies.

In stark contrast to other major central banks, the BoJ has decided against tightening monetary policy in recent months.

“The dollar has seen a meteoric rise versus the Japanese yen over the past three months as the Bank of Japan maintains a dovish policy stance relative to the Federal Reserve,” strategists at Bespoke Investment Group said on Wednesday.

Investors expect policymakers in the US and eurozone to take a markedly different stance as they attempt to tame inflation, a view that has weighed on government bond prices this year.

That weakness extended on Wednesday, with the yield on the 10-year US Treasury note rising 0.07 percentage points to 3.04 per cent as the price of the debt fell. Money managers are betting the Federal Reserve will lift its policy rate above 3 per cent next year, a shift that has already rippled through financial markets.

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