Despite Japanese officials warning that there might be intervention in foreign exchange markets, the Bank of Japan's policy stance aimed at ensuring stable growth and inflation is becoming increasingly inconsistent, which increases the possibility of a further decline in the yen.

Despite Japanese officials warning that there might be intervention in foreign exchange markets, the Bank of Japan's policy stance aimed at ensuring stable growth and inflation is becoming increasingly inconsistent, which increases the possibility of a further decline in the yen.

Zhitong Finance APP learned that on Wednesday, Japanese Finance Minister Shunichi Suzuki (Shunichi Suzuki) said on the rapid changes in the yen-US dollar exchange rate, and it is not ruled out that all means of interfering with exchange rate . Meanwhile, the Bank of Japan is increasing its bond purchases to defend its yield target. It was the Bank of Japan's move that expanded policy differences between Japan and the rest of the world and caused the yen to continue to weaken.

data shows that the Bank of Japan spent 1.42 trillion yen (about $9.9 billion) on Wednesday and Thursday alone to maintain the 10-year Japanese Treasury bond yield at 0.25%. Even considering the passage of time, the scale of 1.42 trillion yen pales in comparison to the 231 billion yen that Japan used to intervene in the foreign exchange market last time in June 1998.

Japanese Prime Minister Kishida Fumio This week chose to emphasize the attractiveness of the weaker yen to companies that want to move production facilities back to Japan. Shunichi Suzuki has repeatedly emphasized that if the exchange rate changes too quickly, the authorities will intervene. This makes the Japanese authorities' position even more contradictory.

In these obvious contradictions, those who bear the yen get the revelation that as long as the yen exchange rate does not change quickly, they can still continue to bear the yen. As of press time, the Japanese yen exchange rate against the US dollar is 143.16 yen.

A major driver of the weakening of the yen is the divergence between US and Japan's policy interest rates. Federal has basically confirmed that it will continue to raise interest rates significantly at next week's meeting, and the Bank of Japan is expected to reiterate its commitment to keep interest rates at a minimum the day after the Fed announced its interest rate resolution, and the Treasury yield gap between the United States and Japan will continue to widen.

Aninda Mitra, head of Asian macro and investment strategy at Mellon Investment Management, New York, said: "The increased verbal intervention by the Japanese authorities shows concerns about the weakening of the yen affecting inflation, but in contrast, the Bank of Japan continues to buy more Japanese government bonds, which will ultimately weaken the yen's defense."

Although the US dollar strengthened the dollar to weaken most non-U.S. currencies have weakened, the yen this year, with a cumulative decline of about 20%.

strategists generally expect the yen to depreciate further. Goldman Sachs said this week that if the yield on U.S. bonds continues to rise, the yen may fall to 1 dollar against 155 yen. HSBC Holdings pointed out last week that the Japanese yen exchange rate against the US dollar may fall below the important mark of 145. RBC expects the yen to fall to 1 dollar against the US dollar this year to 147 yen.

Although the yen continues to weaken, the Bank of Japan Governor Kuroda Haruhiko puts pressure on him to allow bond yields to rise, there is little sign that he will give in. Kuroda's recent remarks show that he is determined to stick to a loose policy to revive Japan's economic growth, just as he did during his ten-year term as the governor of the central bank.

The Bank of Japan's preferred inflation indicator - the Consumer Price Index (CPI), which excludes fresh food, rose 2.4% year-on-year in July, the highest level since 2008. Although Japan relies heavily on imported energy and food, its inflation levels are still much lower than those in other advanced economies. Kuroda Haruhiko has repeatedly stated that if Japan's wage increases do not increase, economic growth will not continue, so interest rates must remain low before a sustained growth cycle is formed.

A survey of 49 economists shows that the Bank of Japan will maintain the benchmark interest rate at -0.1% next week. Economists expect the Bank of Japan will not adjust its policies unless the yen falls to 150 yen.

Jin Kenzaki, head of Japan Research Department of Societe Generale, said: "Kuroda Haruhiko is sure that a small rate hike will not have much impact on the yen, which can be seen from the depreciation of various currencies, including the Korean won."He said the Japanese authorities just wanted to buy time and wait until the end of the Fed rate hike , the pressure from the dollar strengthening subsides when the end of the cycle.

traders doubt whether the Bank of Japan can stick to its easing policy indefinitely. Swap rates betting on the Bank of Japan's policy shift have been quietly rising, with swap rates on 10-year contracts about 20 basis points higher than the BoJ's 0.25% bond yield ceiling, but still below June Nearly 0.6%.

Fumio Kishida announced last week that it would continue to provide fuel and animal feed subsidies and to issue cash to low-income households to alleviate the pain caused by soaring energy and food prices. As rising energy and food costs were amplified by the weakening of the yen, Fumio Kishida actually gave the Bank of Japan a green light, and the Bank of Japan could continue to implement its easing policy regardless of the yen's trend.

Jin Kenzaki said: “Japan’s economic policies are becoming increasingly complex, but this reflects the perception of the best way for the economy to develop. "When the baseline situation, Kuroda Haruhiko won't and cannot give up his loose stance. Kishida Fumio understands this, so he is now focusing on taking advantage of the opportunity of weakening of the yen. ”