After hitting a 32-year low, can the yen stop the decline? How to stop the decline?
htmlOn the afternoon of 20th, the exchange rate of the yen to the US dollar once broke the 150 yen level to 1 dollar, setting a new low point since in August 1990. As of the time of publication by First Financial reporter on the 21st, the exchange rate of the yen to the US dollar remained around 150.38.In fact, since Fed started the interest rate hike cycle on on March 17, the exchange rate of the yen against the US dollar has begun to fall sharply continuously, during which the yen exchange rate has fallen below 114, 120, 144 and other key points . Since the beginning of this year, the cumulative decline of the yen to the US dollar has exceeded 20%, making it the worst performing G7 currency.
150 is generally regarded by the outside world as an important psychological barrier for the yen. Breaking through this level may increase the pressure on further action in Japan. At present, all parties are waiting and see whether the Japanese government and the central bank of will intervene again. On September 22, the yen-USD exchange rate approached the 146 mark during the session, hitting a new low in 24 years, prompting the Japanese Ministry of Finance to intervene in the exchange market . It is also the first time in 24 years that the Japanese government has intervened in exchange rate , which is the first time in 24 years that the Japanese government has sold the US dollar and bought the yen.
All scholars interviewed by First Financial Daily are not surprised by the current sharp depreciation of the yen. Chen Zilei , director of the Japan Economic Center of Shanghai University of International Business and Economics, told 1 Finance that for Japanese citizens, 150 is a key psychological point. After this loss, this point may trigger people's doubts about the regulation of the macro-policy on the other hand, which is not good news for the already sluggish support rate of Kishida cabinet . "Issues such as inflation and depreciation of the yen run contrary to Kishida's original goal of narrowing the gap between the rich and the poor in society."
Japanese media polls in early October showed that Kishida's cabinet's support rate was 35.0%, the lowest level since the formation of the cabinet in September last year, while the non-support rate rose to a record 48.3%, surpassing its support rate for the second consecutive month. The inevitable result of
" Abenomics "?
Outsiders generally believe that Japan and U.S. monetary policy runs contrary to the two currencies, and the widening interest rate gap between the two currencies is the main reason for the sharp depreciation of Japan. The Bank of Japan has remained unchanged in the global rate hike and has remained the key interest rate unchanged. Bank of Japan Governor Kuroda Haruhiko has always kept silent about opening interest rate hikes in the past five monetary policy meetings. In its latest monetary policy resolution on September 22, the Bank of Japan emphasized that it will continue to use the yield curve control (YCC) tool to control the 10-year treasury bond yield at 0.25%, and will continue to purchase commercial paper and corporate bonds at the rate before the outbreak of the epidemic, with the upper limit still set at 5 trillion yen. On October 13, Kuroda emphasized: "We must continue to implement the loose monetary policy of until we achieve the 2% target in a sustainable and stable manner."
Chen Yan, executive director of the Japanese Enterprises (China) Research Institute, has recently continued to pay attention to the fluctuations of the yen on the foreign exchange market . He was not surprised that the yen fell below 150 points. He told the First Financial reporter that the interest rate gap between Japan and the United States is only a superficial factor in the depreciation of the yen, and "the more critical factor of can be traced back to 2013's 'Abenomics' ".
Shizo Abe came to power at the end of 2012, and the following year, a series of economic stimulus policies led by loose monetary policies, active fiscal policies and structural reforms were launched. "The most important content of 'Abenomics' is to achieve the depreciation of the yen. Depreciation of the yen through various methods will, on the one hand, prompt Japanese companies that invest overseas to return to Japan, and at the same time promote Japan's foreign exports." Chen Yan said.
Abe During the eight years of his reign, the yen exchange rate was about 79 yen from 1 US dollar in 2012, and it fell all the way to around 110 yen in 2019. "After Abe resigned as Prime Minister of Japan, the successor of Suga Yoshihide and Kishida government still implemented the policy of allowing the yen to continue to depreciate." Chen Yan said, "This is continuous and has not changed due to government changes. Therefore, it is not surprising that such depreciation occurs today."
"At present, the pressure is more on the Kishida cabinet."Chen Zilei explained, "On the one hand, Kuroda will retire in March next year. On the other hand, the inflation target required in Abenomics is 2%, and the central bank's policy formulation is not aimed at the exchange rate. "He also said that even after Kuroda stepped down, even if the Bank of Japan chose to make corresponding adjustments, how to operate in detail in the future is also a problem.
On the 21st local time, the Ministry of Internal Affairs and Affairs of Japan released the latest data showing that Japan's core consumer price index (CPI) for removing fresh food in September rose by 3.0% year-on-year. After excluding the impact of raising the consumption tax rate, this is the largest increase in about 31 years.
Beware of triple risks evolution
Chen Yan believes that the depreciation of the yen is an important manifestation of the loss of the Japanese economy . He used the World Bank's figures as an example. In 2012, when Abe took office for the second time, he GDP (GDP) totaled US$6.2 trillion. By 2019, Japan's GDP was 5.082 trillion US dollars, down nearly 20%. Now, with the continued depreciation of the yen, some Japanese media calculated that if Japan's nominal GDP this year is converted at the exchange rate of 140, the number is 3.9 trillion US dollars, which is the first time since 1992 that is lower than US$4 trillion; if calculated at the exchange rate of 150, this number will be even lower.
"The shrinking of the entire economic scale means that Japan's foreign exports and the reduction of domestic investment have led to the lack of confidence in the international capital market in the yen, and the deep depreciation of the yen has occurred. "Chen Yan explained, "The Japanese government spends more and more, but its income is getting smaller and smaller, and the trade deficit will inevitably lead to a further reduction in the yen. "Therefore, Chen Yan believes that the yen will continue to decline deeply in the future, "150 points are just a 'pass point'".
Chen Zilei believes that the most important thing to worry about at present is to beware of the evolution of the Japanese market from " exchange rate risk to affect interest rate risk to finally trigger inflation risk ". He said: "At present, exchange rate risk has appeared, and the expectation of inflation risk is intensifying, that is, the depreciation speed is accelerating, and inflation expectation will also accelerate. As for the Japanese government bond market, it is also worth paying attention to whether there will be problems in in the capital market due to liquidity shortage. "
The trade statistics results released by the Japanese Ministry of Finance on the 20th showed that due to the high import energy prices and the sharp depreciation of the yen, Japan's trade deficit of reached 11.01 trillion yen in the first half of the 2022 fiscal year (April to September), a new high in the same period since comparable statistics. In these six months, Japan's imports soared by 44.5% to 60.58 trillion yen, while exports increased by 19.6% to 49.58 trillion yen.
Chen Zilei told the First Financial reporter that in the current situation where the Russian-Ukrainian conflict, high global inflation, and the Federal Reserve's interest rate hike has an impact on the global financial market, it is necessary to prevent regional or global financial risks. "For the Japanese government, the top priority is to regulate macroeconomic policies and corresponding cooperation within the region, and beware of risk spillovers."
