The Japanese yen sold at the lowest price against the US dollar on Monday for the first time since 1998, as the United States is battling soaring consumer prices, one of whose repercussions has been a widening monetary policy gap between Japan and the US.

The yen has been in freefall for months, especially in light of the Fed aggressively hiking interest rates to try and mitigate the soaring inflation. The current financial situation is expected to maintain its momentum through the coming period as the US grapples with several issues, including the sanctions on Russia that have been causing supply cuts, surging gas prices, and rising food prices.

The Bank of Japan said it would adhere to its long-standing monetary easing program, which it hopes would lead to stable growth, a step that goes against what the Fed is doing at home.

The contradicting policies have given the USD a lot more ground against the Japanese currency, with the former buying 135.19 yen. This beats the former record of 126 yen on the dollar, which was the Japanese currency's lowest since 2002.

This high rate has not been seen since the 1998 Asian currency crisis, and it marks a dramatic drop from the record-high January rates of around 115 yen per USD.

As higher oil prices fuel US inflation, "expectations are growing stronger that aggressive US monetary tightening will continue, for the time being, causing US yields to rise further," Takahide Kinouchi, an executive economist at Nomura Research Institute, said.

He attributed the rising prices of the USD against the yen to the growing gap between the long-term interest rates in Japan and the United States.

US consumer prices in May rose 8.6% and soared over what economists thought was the peak in March.

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Inflation in Japan has only just hit the central bank's long-term target of 2%, and while the figure represents a seven-year high, the Bank of Japan says current inflationary pressures are temporary, claiming that the monetary policy is a key aspect in producing more long-lasting growth.

Prices are still on the same path, rising exponentially over the past month in all sectors, including housing, foodstuffs, airline fares, gas, and new and used vehicles, and, according to data released by the US Department of Labor, the price hikes under Biden are setting new records in multiple categories.

As the US economy impacts Japan, BoJ governor Haruhiko Kuroda underlined last week that monetary tightening "is not at all a suitable measure" for his country, which is still economically recovering from the pandemic.

In a bid to see the brighter side of things, Kuroda highlighted the benefits of a weaker yen for Japanese exporters, whose overseas profits are also inflated when they are repatriated, especially as they have seen their stock prices rising in recent months.

The weaker yen could also mean more tourists for Japan, as tourists are more likely to go to countries with inflated economies; however, the locals would have to bear the brunt of the economic crisis that would hike consumer prices and diminish the purchasing power of Japanese citizens.

The yen is highly dependent on how the US Fed acts in its meeting set for September, two months ahead of the midterm congressional elections widely expected to see Biden's democrats suffering seeping losses. Worse-than-projected inflation figures for May have, however, raised concerns about further price hikes in the future.

The treasury has already indicated that it had plans to hike interest rates on loans this week and throughout July, but it is looking like the Fed is more likely to increase the aggressiveness of its policies put in place to combat inflation. That would drastically affect the national economy and increase the chances of recession.

The Biden administration has tried to absolve itself from responsibility for the widespread inflation hitting the country, with Biden himself trying to cast the blame on Russia for the record food and gas prices affecting US citizens.

Energy prices have risen 34.6% over the past year, the fastest since September 2005, food prices have increased 10.1%, and the cost of fuel oil increased by more than two-fold, soaring 106.7% - the largest increase in the history of the consumer price index. A gallon of gas across the US reached $5 nationwide for the first time in history, setting a new record for oil prices.

The US government's budget deficit shrank by $66 billion in May to $426 billion as additional pandemic-related aid programs expired, according to the Treasury's monthly budget breakdown released on Friday.