"Dr. Doom" Roubini , who is famous for successfully predicting the 2008 financial crisis, warned that if the yen exchange rate falls further to 140, the Bank of Japan will be forced to make policy adjustments and abandon radical monetary policies such as the zero interest rate policy.
Roubini said in an interview with the media on Tuesday that the continued decline of the yen this year is mainly due to the policy differences between the Bank of Japan and the Federal Reserve. If the yen exchange rate falls by a further 10%, it will cause serious inflation problems for the Bank of Japan and cause the central bank to abandon the zero interest rate policy and the yield curve control plan:
A further 10% fall in the yen will mean that the policy will occur Variety.
If the yen falls below 140, the Bank of Japan will have to change policy, and the first change will be to abandon yield curve control.
In response to the Japanese Finance Minister's remarks that "it will respond appropriately to the trend of the foreign exchange market," Roubini said that the Bank of Japan first needs to change its monetary policy. Otherwise, any intervention in the foreign exchange market will be just a waste and the continued decline of the yen will not be stopped.
The Japanese yen exchange rate has continued to fall this year. The dollar stood at 136 against the yen on Tuesday, and hit a 24-year high. The dollar-yen exchange rate has not reached 140 yen since 1998, but amid the current surge in U.S. bond yields, the yen exchange rate may fall to this level.
Although the Bank of Japan has been emphasizing the positive impact of the weakening yen on the economy, for households and small and medium-sized enterprises, the negative impact of the depreciation of the yen is obviously much more negative than the positive impact. This negative impact is particularly evident in the context of continued rise in global inflation.
Last Friday, as it focused on supporting a moderate economic recovery, the Bank of Japan decided to maintain an ultra-easy monetary policy and vowed to defend the 0.25% cap on government bond yields through unlimited purchases, becoming a clear exception in the global wave of monetary tightening. .
Deutsche Bank analyst George Saravelos warned that the bond-buying policy adopted by the Bank of Japan to achieve the YCC target may cause "dramatic, unpredictable and non-linear" fluctuations in financial markets and cause the yen to completely lose its fundamentals. Japanese financial market is on the verge of systemic collapse:
The Bank of Japan is printing money on such a large scale that the Japanese yen and Japanese financial markets are losing any valuation anchor based on fundamentals.
If Japanese government bond yields are above the Bank of Japan's 25 basis point target, what incentive do investors have to continue to hold them?
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