• Login
Fintedex — Business, Fincance & Investment News
  • Contact
  • Submit a News Releases
No Result
View All Result
  • Contact
  • Submit a News Releases
No Result
View All Result
Fintedex — Business, Fincance & Investment News
No Result
View All Result
Home Finance

Land of the crashing yen: Will an ever feebler currency save or sink Japan’s economy?

Timothy Wilson by Timothy Wilson
09.05.2022
in Finance
0
Land of the crashing yen: Will an ever feebler currency save or sink Japan’s economy?
0
SHARES
0
VIEWS
Share on FacebookShare on Twitter

Finance & economics | Land of the crashing yen

The yen’s steepest fall in two decades will be hard to arrest

The last time the Japanese yen dipped below 130 to the American dollar, in 2002, China’s economy was smaller than France’s, Vladimir Putin was meeting Western officials with a smile, and the rapper Eminem was atop the pop-music charts. The yen’s slide to that abyss, first reached on April 28th and every day since, has been precipitous: it stood at just 115 to the dollar at the start of this year. Japanese policymakers have begun to fret, leading markets to speculate about whether they will intervene to halt the fall. That would probably prove futile: deep forces are driving the yen’s depreciation.

The most important one is the widening gap in interest rates between Japan and America (see chart). While prices have risen sharply in America, inflation in Japan has remained below the Bank of Japan’s (boj) 2% target. And though inflation may touch that mark later this year, the boj reckons it is being fuelled by one-off increases in costs; idiosyncrasies of Japan’s labour market have meant limited wage growth. As a result, even as the Federal Reserve has begun tightening rates, the boj has maintained its ultra-loose stance. At a monetary-policy meeting last week, the boj reaffirmed that direction, pledging to keep buying ten-year bonds. With more money to be made holding American bonds than Japanese ones, investors have snubbed the latter, dampening demand for the yen.

Trade also plays a role in the yen’s woes. Japan’s current-account balance went into the red in December. Rising import costs have been the biggest culprit: fuel and raw materials make up one-third of Japan’s import bill. In order to buy pricier foreign goods, importers have had to sell more yen. Japan’s borders have remained closed to inbound tourism due to the pandemic, further weakening Japan’s balance of payments.

Policymakers have traditionally seen a weak yen as a positive for Japan and its powerful export-focused industries. Some still do. They also now hope a bit of cost-push inflation may help to break Japan’s entrenched deflationary mindset and to force zombie firms out of the market. Yet the yen has sunk to such lows that concerns are mounting. Consumers are getting squeezed; the government announced another fiscal-stimulus package in April to ease the pain ahead of upper-house elections expected for July. Business sentiment has also turned, even in the manufacturing sectors, says Baba Naohiko of Goldman Sachs, a bank.

One reason is Japanese firms’ sustained efforts to mitigate the risks of currency appreciation by offshoring production. “The flip side,” Mr Baba says, “is that they can’t reap as many benefits from depreciation.” The stuff that is still exported from Japan tends to be high-value-added goods, but the pandemic and supply-chain snags have hampered the export of some of these products, such as automobiles.

Some reckon the yen could continue falling, perhaps to 150 to the dollar, a level unseen even during the Asian financial crisis of 1997-98. Inside the boj, some have argued for shortening the target of the yield-curve control policy from ten-year bonds to five-year ones, a form of soft tightening, but that seems unlikely in the remainder of the term of the current governor, Kuroda Haruhiko. A turning point might come when Japan reopens to foreign tourists, as expected following the elections. Ultimately though, argues Jesper Koll, a Tokyo-based economist, “the yen’s fall from grace will stop and reverse exactly when Japanese investors begin buying their mother markets.” And bringing Japanese securities back to the top of the charts is not a job for the boj, but for Japan Inc.

More from Finance & economics

Watchdogs take a swipe at Apple Pay

Why complaints about Apple’s walled garden are multiplying

The Fed’s balance-sheet is about to shrink. Wall Street is not ready

Could the giant market for Treasury bonds seize up?

Are emerging economies on the verge of another “lost decade”?

Rising interest rates, inflation and geopolitics are a toxic mix


Previous Post

Mr Cook, tear down this wall: Watchdogs take a swipe at Apple Pay

Next Post

Zombie defence: Desperate Lebanese depositors are taking their banks to court

Related Posts

Free exchange: The world needs a new economic motor. Could India fit the bill?
Finance

Free exchange: The world needs a new economic motor. Could India fit the bill?

by Timothy Wilson
16.05.2022
Buttonwood: Why Italy’s borrowing costs are surging once again
Finance

Buttonwood: Why Italy’s borrowing costs are surging once again

by Timothy Wilson
16.05.2022
Pix perfect: Digital payments have gone viral in Brazil
Finance

Pix perfect: Digital payments have gone viral in Brazil

by Timothy Wilson
16.05.2022
A slow train from China: China’s extraordinary export boom comes to an end
Finance

A slow train from China: China’s extraordinary export boom comes to an end

by Timothy Wilson
16.05.2022
Buttonwood: Why Italy’s borrowing costs are surging once again
Finance

Buttonwood: Why Italy’s borrowing costs are surging once again

by Timothy Wilson
16.05.2022
Next Post
Zombie defence: Desperate Lebanese depositors are taking their banks to court

Zombie defence: Desperate Lebanese depositors are taking their banks to court

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Premium Content

Will China’s covid lockdowns add to strains on supply chains?

16.03.2022
: ‘A recession in the next 12 months is not in our base case’: Stocks are getting clobbered. Why smart investors are focusing on the long game

: ‘A recession in the next 12 months is not in our base case’: Stocks are getting clobbered. Why smart investors are focusing on the long game

25.04.2022

: The Great Resignation has led to a wave of self-startups, especially in the Southeast

30.12.2021

Browse by Category

  • Business
  • Finance
  • Stock Market
  • Technology
  • Без рубрики

Browse by Tags

Europe Oleg Volin Russia Ukraine

Fintedex delivers real-time news about the financial industry: feature stories, industry developments, opinions plus the latest on people and trends.

Categories

  • Business
  • Finance
  • Stock Market
  • Technology
  • Без рубрики

Browse by Tag

Europe Oleg Volin Russia Ukraine

Recent Posts

  • The Location Guide, Filmmakers for Ukraine and EUFCN join forces for fundraiser at Cannes 2022
  • Free exchange: The world needs a new economic motor. Could India fit the bill?
  • Buttonwood: Why Italy’s borrowing costs are surging once again

© 2021 Fintedex.

No Result
View All Result
  • Contact
  • Submit a News Releases

© 2021 Fintedex.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
Are you sure want to unlock this post?
Unlock left : 0
Are you sure want to cancel subscription?