After the Bank of Japan (BOJ) announced on Mar. 17 that it would be ending its negative interest rate policy for the first time in seven  years, the yen fell more than one per cent against the U.S. dollar.

According to Bloomberg, the yen fell more than six per cent this year and is the worst performing currency at the moment. It hit a historic low against the Singapore dollar on Mar. 21, with S$1 equal to 112.85 yen.

The Singapore dollar is still performing well against the yen, with S$1 equal to 112.6 yen as of Mar. 22.

This is due to downward pressure exerted by the large interest rate gap between the U.S. and Japan, making the yen relatively less attractive to investors.

This fall came in spite of the BOJ's raising of interest rates for the first time in 17 years. A rise in interest rates typically leads to a stronger currency.

Whether the currency rebounds or continues to fall will depend largely on future decisions impacting this interest rate gap.

If the U.S. proceeds to cut interest rates three times this year, as U.S. Federal Reserve Chair Jerome Powell indicated, the yen might slowly rebound.

At the same time, according to a report by Nikkei Asia, Kazuo Ueda, governor of the BOJ, indicated that he will "proceed slowly" on raising interest rates. This might mean the yen could continue to fall relative to the dollar.

At the moment however, investors and economists are generally divided on the future of interest rates in Japan, and consequentially the direction of the yen.

Top Photo from Manuel Cosentino on Unsplash