Editor of every business: Li Zedong
On October 20, the yen fell below the 1 dollar-150 yen mark for the first time since 1990. As of press time, the US dollar-10 yen was reported at 149.882.
Recently, Japanese authorities have also continuously issued warnings to the market, saying that they will take decisive actions to crack down on the sharp fluctuations in the yen exchange rate caused by speculation. Japanese Finance Minister Shun Suzuki said on Wednesday that the Japanese government will make "appropriate response" in the foreign exchange market based on existing policies.
has been reported that due to the reduction of excess reserves deposited by various institutions in the Bank of Japan, there are even speculations in the market that the Japanese government and the central bank of may have interfered in the market without an announcement.
Has the Japanese authorities intervened "secretly"?
Reuters quoted local media reports that Japanese authorities reiterated their warning of the sharp depreciation of the yen on October 19, and Finance Minister Suzuki Shunichi said he is "carefully" increasing the frequency of checking the exchange rate . At the same time, according to the Japanese news agency, Shunichi Suzuki said that the Japanese government will make "appropriate response" in the foreign exchange market based on existing policies.
Just the day before, Shunichi Suzuki made a similar statement. He also reiterated that the authorities can intervene in the foreign exchange market without any announcement.
reporters in each business found that since early September this year, the Japanese authorities have issued verbal warnings about the decline in the yen almost every day. As early as April this year, Shunichi Suzuki admitted for the first time that the weaker yen was not good for the Japanese economy, when the US dollar hovered at the level of 126 against the yen. However, with the sharp weakening of the yen, the US dollar has appreciated by nearly 30% over the year.
Image source: Xinhua News Agency reporter Zhang Xiaoyu Photo by
Policy makers once believed that as a trade-oriented economy, the strengthening of the yen will have an impact on it, but now they are worried that the sharp depreciation of the yen is pushing up the already high import costs of commodities , squeezing household spending and disrupting business plans.
Last month, the Japanese authorities used 2.8 trillion yen (about 18.81 billion US dollars) to interfere in the foreign exchange market (i.e., sell US dollars and buy yen), which is the first time since 1998 that the authorities have taken action to support the yen in this way.
Reuters quoted data released by the Bank of Japan last Friday as saying that as of Monday, October 17, the excess reserves deposited by various institutions in the Bank of Japan may be reduced by 4.09 trillion yen, partly due to behaviors related to foreign exchange market intervention. The report said that the gap may reflect the authorities' intervention in buying the yen and selling the US dollar, which has also sparked speculation among market participants that the Japanese government and the central bank may have intervened in the market without an announcement.
. According to Huatai Securities analyst Chang Huili, the Bank of Japan's intervention has also had little effect. The yen has fallen 23% against the US dollar this year, the largest depreciation since 1972. If the Japanese yen exchange rate against the US dollar remains at its current low point or even further depreciates, it is not ruled out that Japan's inflation rate will reach 4%-5% in 2023.
"The largest creditor in the United States" sells US bonds
According to CCTV News on October 19, after briefly increasing its holdings of US Treasury bonds in May and June this year, Japan began to continuously reduce its holdings of US Treasury bonds. On the 18th local time, data released by the US Treasury Department showed that Japan's holdings of US Treasury in August decreased by US$34.5 billion month-on-month, and 's holdings of fell to US$1.1998 trillion, hitting a new low since December 2019 . Japan's U.S. Treasury bonds in July fell by US$2 billion month-on-month, and its holdings fell to US$1.2343 trillion.
analysis believes that concerns about high U.S. inflation and further decline in U.S. bond prices have curbed Japan's interest in holding U.S. bonds.
(Picture and text are not related) Japan Tokyo Foreign Exchange Market Picture source: Visual China VCG111402371261
It is worth mentioning. According to CCTV News, citing the Japan Broadcasting Association (NHK) report on the 19th, Bank of Japan Governor Kuroda Haruhiko said on the Japanese Senate Budget Committee that the rapid depreciation of 's current yen will bring difficulties to companies formulating business plans, increase uncertainty, and have a negative impact on the Japanese economy. I do not want such a situation to occur.
On October 17, according to CCTV News citing the Japan Broadcasting Association (NHK), Bank of Japan Governor Haruhiko Kuroda said on the 17th that against the backdrop of high raw material prices, the rise in prices is temporary. He stressed that in order to achieve the goal of sustained and stable prices, will continue to implement the monetary easing policy .
The Bank of Japan "added" non-routine bond purchases
According to Xinhua Finance 20, since this week, as Japan's government bonds have been continuously sold, the -day bond yield has exceeded the 0.25% policy upper limit. The Bank of Japan announced on Thursday (20th) that it would purchase bonds from time to time to curb the rise in yields. This is the first non-routine bond purchase by the Bank of Japan since the fourth quarter bond purchase plan was released. is supported by this, and the Japanese bond market rebounded slightly in the afternoon on Thursday, with the yields in the medium and long ends falling, while the short ends still performed weakly, and the overall amplitude is not large.
at the end of the trading session, the 10-year Japanese bond yield was 0.257%, down 0.1BP, and the 3-year and 5-year yields both rose 0.3BP, with slightly stronger performance on the ultra-long side, with the 20-year and 30-year Japanese bond yields down 0.2BP and 1BP, respectively, at 1.147% and 1.531%.
Market view said that as traders' expectations for the peak of the Federal Reserve's policy interest rate in , Fed, increased, global bond yields continued to rise. The recent rise in Japanese bond interest rates above 0.25%, highlighting the deep-rooted speculation that the Bank of Japan will have to adjust its yield curve control policy. This policy of the Bank of Japan seems to be increasingly inconsistent with the policies of other central banks. Although Japan's economic growth prospects remain weak and there is reason to continue to implement easing policies, extremely low interest rates have pushed the yen to a 32-year low, pushing up imported inflation for consumers and businesses.
However, the Bank of Japan has been strengthening its defense of its policies. In May this year, the Bank of Japan began unlimited bond purchases, limiting the yield on 10-year Treasury bonds to 0.25%. The Bank of Japan also plans to buy more bonds through regular operations in the fourth quarter than last year.
Image source: Visual China - VCG31N1242726075
In the morning, the Bank of Japan announced that it had made non-routine bond purchases for the first time since the fourth quarter bond purchase plan was released. The Bank of Japan proposed to purchase 100 billion yen of 10-25-year Japanese government bonds; purchase 50 billion yen of more than 25-year Japanese government bonds; and purchase 100 billion yen of 5-10-year Japanese government bonds. This action seems to indicate that the Bank of Japan's preference for loose policies remains unchanged.
Goldman Sachs strategists expect the Bank of Japan's yield curve control to remain unchanged. As the dollar is close to the 150 mark against the yen, the Bank of Japan's intervention depends on the yen's fluctuations rather than the exchange rate level. The Bank of Japan is expected to indicate measures to maintain yield curve control at its October 27 meeting.
Takayuki Miyajima, a senior economist at Sony Financial Group, said that while the likelihood of the Bank of Japan's policy changes next week is slim, some traders want to test the effectiveness of the central bank's commitments, as overseas yields have risen and the yen has depreciated sharply. Some investors bet that the Bank of Japan will need to abandon its long-standing yield curve control policy (YCC), which is to buy large amounts of bonds to keep the yield on 10-year bonds around 0%.
According to data from the Japanese Ministry of Finance, as of the week ending October 15, Japanese investors increased their holdings of overseas medium- and long-term bonds by 389.9 billion yen and short-term bonds by 128.3 billion yen; overseas investors reduced their holdings of Japanese medium- and long-term bonds by 182 billion yen and short-term bonds by 74.5 billion yen.
In the primary market, the Ministry of Finance announced that it plans to issue 6 trillion yen yen 3-month discounted treasury bonds and 2.8 trillion yen treasury bonds on October 27.
Daily Economic News Comprehensive CCTV News, Meike.com (Reporter Cai Ding), Xinhua Finance, Public Information
Daily Economic News
