Under the differentiation of the US-Japan monetary policy, the yen decline has continued to intensify and has fallen below the important threshold of 150. Apart from the endless "verbal intervention" and "secret intervention", the Japanese government has not taken further substantial actions, which has worried and confused the market.
On Thursday, October 20, affected by the continued expansion of the interest rate spread of US-Japan , , the exchange rate of the US dollar against the Japanese yen fell below the 150 mark, hitting a new low since 1990. As of press time, the US dollar/JPY still hovered above 150.
Last month (September 22), due to concerns about excessive fluctuations in the yen exchange rate, the Japanese authorities implemented foreign exchange intervention and bought the yen in the foreign exchange market. This is the first intervention since Japan and the United States jointly implemented the "Yen Buy" foreign exchange intervention in June 1998, and it has been 24 years.
But the effect of this intervention did not last long, the yen weakened again, the exchange rate of the yen against the US dollar has fallen by more than 4 yen, losing multiple marks in succession.
Since the last intervention, the Japanese government has only had verbal interventions on its face, despite speculation that the Japanese authorities are quietly conducting small-scale interventions.
On Thursday, before the yen fell below 150, Bank of Japan Governor Kuroda Haruhiko and Japanese Finance Minister Shunichi Suzuki successively issued warnings to the market:
Japanese Finance Minister Shunichi Suzuki: The recent rapid and unilateral weakening of the yen is not advisable. Excessive speculative fluctuations cannot be tolerated and appropriate action will continue to be taken. We will pay attention to the foreign exchange market with a sense of urgency.
Bank of Japan Governor Haruhiko Kuroda: exchange rate is very important. Recent sudden, unilateral exchange rate fluctuations are not desirable. The stable and weak yen will overall be beneficial to the Japanese economy. The sudden weakening of the yen in the recent period has increased uncertainty and brought adverse effects.
However, the market is obviously numb to verbal intervention. But as the yen challenged 150, traders also began to be on guard. In Japan, 150 points is seen as an important psychological level, and breaking through 150 points may increase the pressure on the government to take action.
Yukio Ishizuki, senior foreign exchange strategist at Yamato Securities, told the media: "Price trends show that market participants are strongly wary of government intervention."
Why has Japan been slow to take action?
The Japanese government has its own abacus.
UBS analysts Masamichi Adachi and Go Kurihara pointed out in a report on October 18 that the depreciation of the yen too quickly is a bad thing, but the depreciation of the yen is not a bad thing for the entire economy, because Japan's current account is positive, and Japan's net foreign assets are also the largest in the world:
Although the trade balance has turned into a deficit, Japan's current account balance remains surplus, and the weaker yen means an increase in surplus.
Japan has the largest net foreign assets, which means stronger forex (weaker yen) means an increase in asset value.
In short, although importers and consumers are affected, corporate profits are generally boosted by the weaker yen, and the higher the corporate profits, the higher the taxes.
UBS said it is worth noting that both Kishida Fumio government and the Bank of Japan agree with this view, and the government has not put pressure on the Bank of Japan to tighten its policies to prevent the depreciation of the yen.
The next important catalyst for investors will be the Bank of Japan's policy meeting next week. Last month, Japan conducted its first foreign exchange market intervention since 1998 after Kuroda Haruhiko reiterated her willingness to adhere to the loose monetary policy of more than .
Goldman Sachs strategist Kamakshya Trivedi predicts that the Japanese authorities' control of the yield curve (YCC) will remain unchanged. As the yen approaches the 1 dollar-150 yen mark, intervention depends on the yen's fluctuation rate rather than the exchange rate level. The Bank of Japan is expected to demonstrate efforts to maintain yield curve control at its Oct. 27 meeting.
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