Reporter of the Economic Business: Cai Ding Editor of the Economic Business Business: Gao Han
Beijing time on October 21, Kyodo News reported that Japan is considering state spending more than 20 trillion yen (about 133.3 billion US dollars) to fund economic stimulus plan . After the report was released, the US dollar rose rapidly against the Japanese yen, continuing to hit a 32-year high.
On the evening of the same day, according to the " Nikkei News ", a person citing anonymous report, the Japanese authorities intervened again to defend the yen. The dollar fell 2.6% against the yen to 146.23, the biggest single-day drop since March 2020. But Japan's Deputy Minister of Finance and Japan's highest foreign exchange official, Masato Kanda, said he would not comment on whether he intervened.
However, the industry is not optimistic about whether the Japanese authorities' intervention will reverse the continued depreciation of the yen. Mitsubishi UFF Financial Group Global Market Research Director Derek Halpenny said in a comment email to a reporter from " Daily Economic News ", " At least until market participants can be convinced that Feder monetary policy will turn, we cannot see (Japanese authorities) interventions work. "
Bank of Japan's intervention is "completely useless"?
According to Bloomberg, at around 10:30 pm on October 21, Beijing time, the yen began to soar against the US dollar. In the following two hours, the yen futures on the Chicago Mercantile Exchange traded about US$25 billion, setting the largest single-day transaction volume since November 2016.
Although several Japanese government officials warned the market not to test intervention strategies this week, the yen fell to a 32-year low of 151.95 against the dollar on Friday. Authorities have repeatedly said they will take action to curb the yen 2 unilateral decline in , but some analysts have warned that any intervention by the Bank of Japan will have limited effect because Japan remains low interest rates as central banks in other countries raise interest rates.
The well-known financial blog Zero Hedge tweeted that the Bank of Japan's intervention last night was completely useless. It can be seen from the US dollar-JPY chart that after the Bank of Japan's intervention in September, the US dollar-JPY still rose all the way and broke through the important psychological mark of 150 this week.
Image source: Zero hedge
In September this year, after the US dollar broke 145 against the yen, the Japanese government intervened in foreign exchange for the first time since 1998. Throughout September, the Japanese Ministry of Finance spent nearly $20 billion to defend the yen.
According to Reuters , Japanese Finance Minister Shunichi Suzuki issued several warnings this week. Earlier on Friday, he reiterated that the Japanese government cannot tolerate speculative and excessive foreign exchange fluctuations and will take appropriate actions to deal with excessive trends. However, Bank of Japan Governor Kuroda Haruhiko has made it clear that he has no intention to change the loose monetary policy that caused the depreciation of the yen to .
Derek Halpenny, head of global market research at Mitsubishi UF Financial Group, said in a comment email to a reporter from the Daily Economic News, "Japanese Finance Minister Shun Suzuki once again expressed concerns about the yen on Friday, but as the US dollar broke through 150 against the yen, his remarks yesterday were slightly different, involving ensuring that the Japanese government takes action to offset the impact of the depreciation of the yen and maximizing the positive impact of the weak yen."
Derek Halpenny further analyzed that if the Ministry of Finance does not take action, it will definitely trigger the selling momentum of the yen in the coming weeks. "The risk of Japanese authorities taking action will certainly continue, but for the US dollar against the Japanese yen, Japan has repeatedly emphasized that there is no specific level of protection, which means that the relatively orderly rise of the US dollar against the Japanese yen still has room for continued space for ."
On Friday night, the US dollar against the Japanese yen plunged sharply (Image source: tradingview)
The Bank of Japan will hold a two-day policy meeting next week, and the interest rate resolution will be announced next Friday, but policymakers almost ruled out the possibility of preventing the local currency from weakening by hiking . Most strategists currently expect the Bank of Japan to continue to maintain its ultra-low interest rate policy at its policy meeting on October 28, but some analysts said the Bank of Japan may need to abandon its YCC policy.Governor Haruhiko Kuroda has also stated that he will continue to implement the current monetary policy to increase wages. Bipan Rai, head of foreign exchange strategy at the Canadian Imperial Commercial Bank , said that secret intervention is just a waste of time - it will not really solve the fundamental problem. To truly stabilize the dollar-JPY exchange rate, it will require a slowdown or reversal of the decline in the long-term interest rate in the United States. Otherwise, the Bank of Japan would have to revise its yield curve control plan.
"As we have said for some time, is unlikely to see the (Japanese authorities) interventions work, at least until market participants can be convinced that the Fed’s monetary policy will turn. The higher dollar against the yen reflects the increasing confidence that the Fed will raise interest rates by 150 basis points by the end of the year," Derek Halpenny added.
Japanese media: The Japanese government plans to invest more than 20 trillion yen for economic countermeasures
"Daily Economic News" reporter also noticed that on Friday night, Beijing time, the market's expected change in the range of the Fed's interest rate hike also led to a certain extent the US dollar against the yen falling. Just earlier on Friday, the yield on the 10-year U.S. bond soared to 4.3%, a record high since 2007, while Japan's 10-year treasury bond yield was only 0.25%.
However, the " Wall Street Journal ", known as the "Federal News Agency", reported on the same day that Fed officials may consider slowing down the pace of aggressive interest rate hikes. In addition, some Fed officials have expressed concerns about a sharp rate hike and discussed slowing down the pace of aggressive rate hikes.
In addition, on the day the Japanese authorities intervened in the foreign exchange market on the evening of the 21st Beijing time, Kyodo News reported that Japan was considering state spending more than 20 trillion yen (about 133.3 billion US dollars) to fund economic stimulus plans. After the report was released, the US dollar rose rapidly against the Japanese yen, continuing to hit a 32-year high.
report said that the Japanese government and the ruling party have begun to coordinate the investment of more than 20 trillion yen (about 960 billion yuan) of national funds to be used for comprehensive economic countermeasures with the core of coping with rising prices. Measures to reduce the burden of electricity and urban gas costs, stimulate tourism demand and support parenting will be included to ensure that the scale of the demand gap exceeds Japan's overall economy. It is planned to decide at the cabinet meeting on the 28th and submit the second supplementary budget for 2022 to the interim parliament.
is expected to further increase the scale of projects, including local government and enterprise expenditures. Regarding the financial resources of the state, it will ensure trillions of yen, including the remaining part of the 2021 budget and the tax increase in 2022, and most of them will be raised through the issuance of deficit government bonds.
The government and the ruling party still have some opinions that state funds should be further allocated, which may increase the COVID-19 response and reserve fees for coping with rising prices or may be filled by using the fund . In this case, priority scale leads to taxes being used for unnecessary non-emergency projects, and concerns about further fiscal deterioration may be exacerbated.
The government has decided to take measures to reduce the burden on electricity and gas costs in cities. The electricity bill will be considered to apply from January next year and will continue until next fall. In addition, liquefied gas burden reduction measures that are mainly used locally are also discussed. Currently, the monthly investment of about 300 billion yen of gasoline subsidy will be extended after January.
In addition, measures to stimulate tourism demand will continue to be implemented, and economic support will be provided to pregnant women. The "Economic Security Guarantee Fund" that supports enterprises and universities to develop cutting-edge technologies will double to about 500 billion yen.
Regarding the scale of countermeasures, Prime Minister Kishida Fumio 20 mentioned the economic downturn caused by rising prices and the sluggish overseas economy in his parliamentary defense on the 20th, saying: "Bold and decisive countermeasures should be needed. I hope to formulate a scale that the people can truly feel." Liberal Democratic Party President of the Government Investigation Hagida Koichi said that the "supply and demand gap" that reflects insufficient demand is converted to 15 trillion yen for the whole year, and expressed the idea of implementing various measures with a general goal of 30 trillion yen, which is the same as the economic countermeasures in November last year.
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