On April 13, the yen exchange rate fell to the 126 yen level per dollar for the first time in about 20 years.

The background is the difference in the direction of monetary policy between Japan and the United States.

The United States is poised to accelerate rate hikes to curb inflation, and Japan is persistently continuing strong monetary easing to support the economy.


If this composition does not change, the interest rate differential between Japan and the United States is expected to widen, so the main scenario of the market is that the yen will depreciate further.


As soon as I thought so, I heard a story that I was curious about.


"American inflation is at its peak."


If true, the impact is not limited to the yen, but extends to the entire market, including stocks.

What does that mean?


(Hiroshi Nakazawa, Reporter, Ministry of Economic Affairs)

Price increase for the first time in 40 years in the United States

The hint was the day before the 13th, when the yen depreciated to the 126 yen level.



9:30 pm on Tuesday, 12th.



The US March CPI = Consumer Price Index has been released.



"Plus 8.5%" compared to the same month of the previous year.



It was the highest level in about 40 years.



In addition to a large increase of 48% in "gasoline", "electricity bill" increased by 11.1% and "food" increased by 8.8%.



It showed that record inflation was spurred by the rise in crude oil prices triggered by Russia's invasion of Uraina.



It was 0.1 points higher than the market forecast in advance, and even if high inflation was confirmed, the yen was likely to depreciate further.



However, after the announcement of this CPI, the yen exchange rate in the New York market once shook in the opposite direction of yen appreciation.

The key is the "core index"

The reason for this move was the "core index" of the published indexes.



The core index is the overall CPI minus energy and food with high volatility.



In fact, the core index for March was "+ 0.3%" compared to the same month of the previous year.



It was below market expectations and was the lowest since September 2021.



It was "used cars" that pushed down the core index.

A car that is indispensable for life in the United States.



Due to the disruption of the supply chain due to the spread of the new corona infection, the demand for used cars increased because parts such as semiconductors could not be procured and the production of new cars could not keep up, and the price has been rising recently.



However, the price of used cars, which was a major factor pushing up prices, began to decline for the second straight month.



In addition, WTI's futures price (an international indicator of crude oil prices), which was in the $ 120 range per barrel in early March, fell to around $ 100 at that time.



There was also a perception that energy prices were showing signs of a break.



For this reason, the market is partly perceived as "the US inflation has peaked out", and is associated with "the peak out of inflation" → "the slowdown in the US interest rate hike" → "the widening of the interest rate differential between Japan and the US is gradual". From the game, it became a reflexive movement of "buying yen and selling dollars".

Peak out theory has already spread

However, this reflexive movement was only temporary, and on the afternoon of the 13th, when the date changed, the Bank of Japan's Governor Kuroda said, "We will continue strong monetary easing persistently." The movement of "selling yen and buying dollars" has intensified, breaking through the "Kuroda line" * of around 125 yen at a stretch, and hitting the yen's depreciation level for the first time in about 20 years.

* See the economic column "How far is the yen depreciating? The conscious" Kuroda line ")

How far will the yen depreciate in the future?



According to interviews with market participants, there is an opinion that the yen will depreciate further, such as "It will go to the 130 yen level, and in some cases it will reach the 135 yen level." There is also an opinion that "it may not be there."



The view that the yen is not depreciating so much is based on the "peak-out theory of inflation".



In addition, the "peak-out theory of inflation" has already spread to various markets, such as slowing the pace of increase in long-term interest rates in the United States and causing the Dow Jones Industrial Average to rise.



Inflation in the United States can be said to be the biggest point that influences the current world economy, including the government's economic policy and the FRB's monetary policy, so it seems that the market will be more interested in whether it really peaked out in the future. ..

On the 18th, GDP from January to March and retail sales in March will be announced in China.



Infection with the new coronavirus has spread in Shanghai and other areas, and strict restrictions on going out continue, and retail sales are expected to decline according to market forecasts.



Also, on the 22nd, Japan's March Consumer Price Index will be announced.



This is also noteworthy as it reflects for the first time how the tightening situation in Ukraine is affecting prices.