· The yen may fall further after falling below 140. Japanese officials may interfere with the foreign exchange market
On Thursday, the yen fell below 140 for the first time in nearly 25 years. As the obvious differences between the United States and Japan's monetary policy expand, the yen decline may further increase. This has once again sparked rumors that Japanese officials may intervene in the foreign exchange market to support the yen.
on Thursday the dollar surged 0.9% against the Japanese yen in spot trading, expanding the year-to-date gain to more than 20%. Options markets show traders betting that there may be more trades in the future, with pricing bias towards contracts that will earn returns if the dollar continues to rise. This upward momentum may induce dollar bulls to continue buying on dips, although some indicators indicate that the pair may be in the overbought area. The current decline of
yen is the worst on record, at least since Japan introduced the floating exchange rate system in 1973, and has fallen from peak to valley bottom. Compared with the peak in 2011, the troubled yen has fallen by more than 46% against the U.S. dollar, down more than 45% during the Asian financial crisis in the late 1990s. The decline in
yen makes it the worst performing G10 currency this year, reflecting the growing division between the Bank of Japan and the Federal Reserve Bank of Japan, which is maintaining loose policies to boost the economy, as the depreciation of the yen can help the economy by making the country's exports more competitive.
"The yen is quickly becoming the only zero-yield currency in the world," JPMorgan strategists Benjamin Shatil and Sosuke Nakamura wrote on Thursday. "The tough remarks of the Federal Reserve after the Jackson Hall meeting, the decline in the risk of the US economy recession, and the apparently firm dovish commitment of Kuroda Haruhiko should keep moving higher."
economic data improvement and the hawkish attitude of the Federal Reserve are pushing the dollar index to continue to rise, and the indicators for measuring the strength of the US dollar rose to an all-time high on Thursday.
, head of G10 currency research at Standard Chartered Bank, said that in addition to direct intervention, the continued rebound of the yen will require the Bank of Japan to implement a significant rate hike in , which will cause significant losses to the economy.
Some analysts said a breakout of 140 points may trigger government intervention, but economists have repeatedly pointed out that any failed attempt to support the yen will pose a high risk to Japan.
Japanese Finance Minister Suzuki Shunichi Latest stated that the foreign exchange market has fluctuated greatly recently. Observe the trend of foreign exchange with a high sense of urgency, take appropriate actions on foreign exchange if necessary, and any necessary response measures will be kept in touch with others.
· The Japanese government may come forward for the first time to purchase natural gas
In order to avoid the shortage of winter supply, Japan will take unprecedented measures. If Japanese companies cannot afford the energy costs, the Japanese government will intervene in purchasing liquefied natural gas .
According to local broadcaster NHK, the Japanese government will develop a framework to allow state-owned institutions Japan Oil, Gas and Metals National Corp. to bulk imports of liquefied natural gas when natural gas prices rise to a difficult time ensuring adequate supply. This will be the first time that the Japanese government has purchased fuel on behalf of private enterprises.
NHK said a group within the Ministry of Trade will meet next week to discuss the measures. Officials will also develop a plan to limit gas use in various industries amid supply shortages, the report said.
Japanese electricity producers typically store LNG supplies for about two weeks and are rushing to buy goods in preparation for winter. But the recent surge in spot prices has forced some utilities to stop purchasing supplies, according to traders.
Still, on August 28, Japanese utility companies held 2.63 million tons of liquefied natural gas inventory, the highest since April 2017.
Japan's natural gas is almost entirely dependent on imports, with nearly 40% of natural gas imports coming from Australia and 10% from Russia. Australia is considering cutting gas exports to fill the domestic energy shortage, which may further increase global supply pressure.The current energy crisis in Europe makes it particularly important for Australia's energy supply to stabilize, because Australia is one of the world's largest natural gas exporters.
Energy wholesale prices in Australia's largest electricity market tripled in the three months to June. Under a mechanism a few years ago, governments could ask gas producers to prioritize domestic demand and limit exports. This emergency power has never been used, but lawmakers said this month they could use the mechanism to prevent gas shortages next year. The Australian gas industry warned the government that imposing temporary restrictions on the export volume of producers could damage the country's reputation. A Shell spokesman said the mechanism is an important short-term tool that helps customers have confidence in the gas supply. However, further intervention may bring risks to future investments in developing natural gas supply, which in turn affects prices.
Japanese economy Industry Minister Yasatsuke Nishiniura had previously stated that he intends to put pressure on Australia to avoid any impact on Japan's import of liquefied natural gas. Japan believes that the Australian government may trigger Australia's domestic natural gas security mechanism and will effectively limit the country's liquefied natural gas exports. Yasintoshi Ninishimura said that Japan has been talking to Australia at different levels on this mechanism. It is understood that the Australian government is holding talks with the Japanese government and businesses and considering the effectiveness of the mechanism and the specific measures to be taken once the security mechanism is implemented.
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