What happened to the yen after the Japanese government and the Bank of Japan interfered in the foreign exchange market for a week?
htmlOn the morning of September 22, the Japanese yen exchange rate fell below the important mark of 145, attracting attention. In the afternoon of the same day, the Japanese government and the Bank of Japan decided to sell the US dollar and buy the yen to interfere with the foreign exchange market and support the yen. Affected by the news, the yen exchange rate jumped by more than 500 points on the day, and once recovered the 141 mark.Although the yen has been boosted in the short term, the external environment facing the yen is still severe under the pattern of Fed hike rate and the US dollar has been strengthening. From the perspective of the foreign exchange market, the yen, which still insists on looseness, depreciated back to the 144 range again on Tuesday (27th), and has not yet escaped the pressure of depreciation.
yen exchange rate fell below the 144 mark a few days ago again. Picture source: UK is financial information
Does this mean that Japan's foreign exchange market intervention only treats the symptoms and not the root cause?
On the evening of September 28, Institute of World Economics and Politics, Chinese Academy of Social Sciences, /National Global Strategy Think Tank, Deputy Director of the Center for World Economic History Research Center and Researcher of the International Trade Research Office, said in an interview with Observer.com that in the context of the United States continuing to raise interest rates while Japan keeps negative interest rates unchanged, with the increase in the spread of yen and US dollar , the depreciation of the yen is inevitable.
Ni Yueju predicts that 1 US dollar against 150 yen is the depreciation expectation that Japan can bear. Once this psychological defense is exceeded, the Japanese government will also intervene. "If the effect is still not good, it is not ruled out that the possibility of giving up loose monetary policy is not ruled out. Because the excessive depreciation of the yen is also a pain that the Japanese economy cannot bear."
Ni Yueju pointed out that under the current situation, the marginal effect of quantitative easing is getting smaller and smaller, and it is difficult to achieve better economic boosting through the depreciation of the yen. But at present, Japan has not found a better way to support economic growth than " Abenomics ".
How do you view the logic behind Japan's "to carry out looseness to the end"? Does the embarrassing situation of the yen mean the setback of "Abenomics"? In the current global trade environment, why is the strategy of depreciating the currency of -stimulating exports gradually failing? Through expert interviews, Observer.com tries to provide readers with some perspectives to get to the problem.
The knot behind Japan's "no interest rate hike": economic downturn, deflation
Kuroda Haruhiko became the president of Bank of Japan (i.e., the governor of the Bank of Japan). When he took office, he launched a radical monetary easing program called "alternative dimension". In addition to putting forward a 2% inflation target, Kuroda Haruhiko has also promised to maintain relevant policies before the Japanese economy gets rid of deflation.
Facts have proved that Kuroda Haruhiko has indeed fulfilled his promise. After the Federal Reserve entered the interest rate hike channel, many economies, , EU and the UK, have begun to "turn from doves to eagles". Even in the face of the unilateral trend of selling yen-buying US dollar trading, the Bank of Japan's monetary policy has not changed, which can be said to have "not turned back if it hits the wall."
Bank of Japan Governor Haruhiko Kuroda Photo source Bank of Japan
The reason behind the "head" of Japan's monetary policy is still that the economy is "over-cool".
Ni Yueju, deputy director of the Center for World Economic History Research, Institute of World Economics and Political Science, Chinese Academy of Social Sciences/National Global Strategy Think Tank and researcher at the International Trade Research Office, said in an interview with Observer Network on Wednesday (28th) evening that Japan has entered a long cycle of quantitative easing since the Asian financial crisis in 1997.
"The main purpose of Japan's long-term adherence to loose policies is to free the Japanese economy from deflation by releasing liquidity and boost the Japanese economy that has continued to be sluggish after the bursting of the bubble economy."
Ni Yueju pointed out that a moderate inflation rate is an important indicator to measure whether the economy has escaped deflation and enters stable growth. The goal of "Abenomics" three arrows is to achieve a inflation rate of 2%. Although there have not been many years of inflation exceeding 2% in the past 10 years, Japanese society generally believes that quantitative easing policies are the most effective policy to support economic activities that can be adopted at present.
"It can be said that low inflation is the main basis for Japan to insist on 'absolutely no need to raise interest rates'.”
It is worth mentioning that from the data point of view, Japan's CPI and core CPI have both exceeded 2%.
Has the Bank of Japan achieved the goal of "Abenomics" three arrows?
Japan's inflation rate has recently exceeded 2%. Data source: Japan Statistics Bureau
Ni Yueju said that due to the impact of the new crown epidemic, especially the conflict between Russia and Ukraine, Japan's inflation level has exceeded 2%, and even reached 3% in August. However, this is not caused by its own consumption growth, but the imported inflation caused by the high prices of imported energy and food, and is not a manifestation of economic recovery.
What is more difficult is that at this time, Japan will face great economic pressure on interest rates. Now it can be said that it is a dilemma.
Ni Yueju reminds, "When the economy is still sluggish, once the interest rate hike will increase the debt burden of the government, enterprises and even individuals, the production side, demand side and consumption side will be affected. Once the company's capital chain breaks, the impact on the Japanese economy will be fatal. ”
"Abenomics" is not working? Japan has not yet found a better solution
Visiting researcher at the Japan Research Center of Liaoning University, Chen Yang, previously introduced to Observer.com that there are two views on the depreciation of the yen in Japan: "good yen depreciation" (good yen) and "bad yen depreciation" (good yen depreciation), which are different views on the pros and cons of depreciation of the yen.
So-called "good yen depreciation" (good yen depreciation) ”, that is, the depreciation of the yen can drive Japanese commodity exports and increase Japanese corporate profits; the "bad yen depreciation" has increased the cost of Japanese imported goods and the living burden of people.
Chen Yang said that in recent years, although "Abenomics" has successfully stimulated the recovery of Japan's economy, the benefits are mainly large Japanese companies, not ordinary people. Including the Japanese economic circle, it is now generally believed that this is "则い光全".
A scene in the streets of Shibuya, Tokyo, Japan Image source Xinhua News Agency
What's more difficult is that the logic of "the depreciation of the yen brings price advantages" is ushering in important changes.
Ni Yueju pointed out in an interview that for many years, Japan has used the depreciation of the yen as a good medicine to stimulate export growth, and even has a certain degree of dependence. However, under the background of globalization, intermediate goods trade has become an inevitable result of the deepening of international division of labor, and the trade of goods, mainly exported by finished goods, is quietly replaced by intermediate goods trade. .
This means that the depreciation of the yen leads to a sharp rise in the prices of intermediate products, which will increase the production cost of the final product, resulting in an increase in the price advantage brought by the depreciation of the yen, and the increase in the cost of and even the import may exceed the price advantage brought by the depreciation of the yen, and the purpose of stimulating exports cannot be achieved.
Japan is suffering from the trade deficit of Screenshot of the Japanese Ministry of Finance Communiqué
"As of September 2022, the yen has depreciated by about 30%, but it has faced a huge trade deficit for 12 consecutive months, which shows this problem. ” Ni Yueju further pointed out that due to the impact of the epidemic, the service trade benefits may be brought about by the depreciation of the yen are also very small.
So under the current situation, the marginal effect of quantitative easing is getting smaller and smaller, and it is difficult to better boost the economy through the depreciation of the yen. At present, Japan has not found a better way to support economic growth than "Abenomics".
Intermediate products trade brings important changes, but China and Japan are very different
Japan, which is hoped for the depreciation of the local currency - stimulating exports - driving growth, is now in trouble.
Under the dominant US dollar, the strengthening of the US dollar is like an amplifier, which amplifies the impact of the world trade pattern and the surge in international commodity prices on Japan. The rising prices of imported goods have pushed up the production costs of enterprises, and export companies will even face a "unprofitable" situation, especially small and medium-sized enterprises, which are under great pressure.
As Chen Yang previously described to Observer.com: "The depreciation of the yen will only make the 'stronger stronger and the weaker weaker'. ”
The prevalence of intermediate goods trade today has brought about major changes to the world trade pattern. Japan, which needs export growth to promote economic development in the long term, faces a considerable headwind.This makes people wonder: The problems Japan is facing now, does China, as a major exporter, need to worry about?
In an interview with Observer.com, Ni Yueju pointed out that in the context of globalization, trade in intermediate goods has become an important part of international trade in . China is deeply involved in the global value chain and its position in the international production network is becoming increasingly important. In 2019, China's import of intermediate products accounted for 76% of the total imports. Therefore, if the RMB depreciates excessively, the increase in the price of imported intermediates will also have a certain impact on exports.
Ministry of Industry and Information Technology: The proportion of intermediate products in manufacturing industry in the world reaches about 20%, and open cooperation continues to deepen
However, Ni Yueju also pointed out: "China is very different from Japan."
First, China's industrial structure is more complete, and domestic products have strong ability to replace imported products. If the price of imported intermediates is too high, export companies can switch to purchasing domestic products. Especially with the advancement of China's domestic and foreign trade integration, the ability of domestic imported substitutes will become stronger and stronger.
Second, the depreciation of the RMB has reduced the cost of foreign investment in China, which can attract more multinational companies to invest in China and set up factories. Especially after the reserve ratio of the People's Bank of China to foreign exchange deposits has decreased, foreign capital has become increasingly frequent. At the same time, the entry of foreign capital can further enhance the domestic supply capacity of intermediate products.
Third, RMB settlement accounts for an increasingly larger proportion in foreign trade. Especially in recent years, some countries have successively adopted RMB settlement in trade with China, such as Türkiye , Russia, Indonesia and other countries. In , ASEAN countries, payment transactions can generally be used in RMB. With the expansion of the scope of RMB settlement use, the pressure on the rising import price caused by the appreciation of the US dollar can be reduced to a certain extent.
The international status of the RMB has steadily improved. Source: "2022 RMB Internationalization Report"
Fourth, the RMB is currently fully convertible under trade, but is still partially convertible under capital, and is limited to convertible under financial investment, which can also reduce the risk of RMB exchange rate . What's more, China's sufficient foreign exchange reserves can also deal with malicious speculation from foreign capital at any time.
This article is an exclusive article of Observer.com and may not be reproduced without authorization.
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