🇮🇳 Rupee at 90+ & Japan’s Policy Shift — What It Means for India’s Economy

The Indian Rupee crossing ₹90+ against the US Dollar has triggered fresh concerns in financial markets. But this time, the story is not limited to domestic factors — a major global shift, especially in Japan, is playing a crucial role. Here’s a clear, simplified breakdown for you to understand impact of it : 1️⃣ Rupee at 90+: Why It Matters More This Time The rupee’s fall to around 90.44 without aggressive RBI intervention has created mixed effects. ✔ Small Positive Impact A weaker rupee makes imported goods from China costlier, which indirectly benefits: Indian manufacturers Make-in-India initiatives Export competitiveness However, this benefit is tiny compared to the damage on the other side. ✘ Major Negative Impact India is a large importer, so a weaker rupee hits the pocket hard. Costs rise for: Crude oil Electronics Fertilizers Pharma raw materials Industrial machinery This leads to: Higher inflation Higher Current Account Deficit (CAD) Pressure on company profit margins With India’s annual import bill at ~$850 billion, every ₹1 depreciation adds significant stress. --- 🇯🇵 2️⃣ Why Japan’s Policy Shift Is the Hidden Trigger Japan has been the world’s biggest provider of cheap liquidity for two decades. Because of near-zero interest rates, global investors often borrowed yen and invested in higher-yield markets — including India. This is called the carry trade. But things are changing. Japan’s 10-year bond yields have risen to ~1.92%, the highest in decades. If the Bank of Japan (BoJ): Raises interest rates, or Signals the end of ultra-loose monetary policy, …it will shake global markets. What we are already seeing: Yen strengthening Japanese investors selling foreign assets Emerging market currencies weakening (including INR) Global yields rising Dollar liquidity tightening Japan matters because its policy shift can ripple across the entire financial world. --- 🏦 3️⃣ Why RBI Is Not Intervening Yet Many are asking: Why isn’t the Reserve Bank of India acting aggressively? The reason is strategic. The RBI knows the BoJ meeting on 18th December is more crucial than even: The US Federal Reserve The European Central Bank Domestic policy decisions If RBI intervenes too early: It may waste forex reserves And a Japan-induced shock could still weaken INR later So RBI is saving its firepower for after the BoJ clarity — to prevent a disorderly fall. --- ⚠️ 4️⃣ The Real Risk If BoJ Tightens If Japan even hints at policy tightening: Global yields may spike The dollar may strengthen Emerging markets may see outflows Risk assets could correct Carry trades may unwind sharply USD/INR may see short-term volatility Japan has exported deflation and low-cost liquidity for 20 years. If that flow slows, global markets will feel the pressure. --- 🧭 5️⃣ Final Takeaway — Why This Matters for India India is facing two major pressures at the same time: 1. Weak Rupee → Higher inflation → Increased import bill → Wider CAD 2. Japan’s Policy Shift → Lower global liquidity → Pressure on emerging market currencies → Increased volatility The next few weeks are crucial. Japan’s monetary decisions could influence India’s currency more than any domestic policy action.