The yen plummeted and depreciated to a 20-year record, and the Bank of Japan had an unspeakable secret

Data map: Japanese yen.

　　Zhongxin Finance, April 23 (Gong Hongyu) What does it feel like for a good student to suddenly "fail" the test?

Recently, the Japanese yen, which has always had its own "halo" as a safe-haven currency, has stepped out of a "slumping" downward curve.

　　On the 20th, after a 14-day losing streak, the yen fell to about 129 yen to the dollar at one point, just one step away from the "panic point" of the Bank of Japan of 130.

　　Analysis believes that passive depreciation, active depreciation and Japan's economic performance and other factors have jointly contributed to the sharp fall of the yen.

With the Bank of Japan reaffirming its firm commitment to ultra-loose monetary policy, the yen exchange rate may continue to decline in the short term.

Yen depreciates, exchange rate hits 7-year low

　　In fact, yen weakness is not a one-day cold.

As early as last year, the yen showed a "decadent" trend, and since the beginning of 2021, the yen has depreciated by about 30% against the dollar.

Especially in 2022, the depreciation of the yen will continue to accelerate.

　　On April 22, the exchange rate of the yen fell below the 140 yen mark for 1 euro, hitting its lowest level in nearly seven years.

On the 21st, the exchange rate of the yen against the dollar just hit a new low in nearly 20 years.

　　The exchange rate of the yen to the yuan also fell below the 1 yuan to 20 yen mark, hitting the lowest level in nearly seven years.

The yen has become the second-worst currency in the foreign exchange market after the ruble.

　　Ms. Liang, who has worked in Japan for many years, reported to Zhongxin Finance that her salary in Japan is converted into RMB, which is several thousand yuan less per month than a few months ago.

Ms. Xia, who lives in Japan and is engaged in the purchasing industry, recently posted a discount message in the circle of friends that "the exchange rate is very good, and the price of luxury goods will be greatly reduced in RMB settlement".

The weak yen is affected by many factors

　　Previously, the Japanese yen has been recognized as a safe-haven asset in the global market.

When the crisis occurs, global market traders will buy the yen in a big way, and this halo is gradually fading?

　　The market generally believes that the trigger for the fall of the yen is that Japan and the United States and Europe run counter to the monetary policies.

The Fed announced a 0.25% interest rate hike on March 16, and the market expects the Fed to continue raising interest rates by 0.5% in May.

As the United States, Europe and other major economies tightened their monetary policies across the board, the yields of national government bonds in various countries rose one after another, and the exchange rates of the US dollar and the euro strengthened.

Dollar.

(Data map)

　　At the same time, the Bank of Japan has made it clear that it will maintain a large-scale monetary easing policy and

by purchasing long-term government bonds .

Although the yen exchange rate continued to fall, the central bank emphasized that

.

　　For example, on April 20, the Bank of Japan purchased unlimited amounts of 10-year government bonds at a fixed interest rate of 0.25%.

The Bank of Japan will also continue to buy bonds at fixed interest rates on April 21, 22, 25 and 26.

　　It can be seen that, rather than maintaining the yen exchange rate, the Bank of Japan clearly places more emphasis on applying easing policies to support the economy's recovery from the epidemic.

　　After the outbreak of the epidemic, Japan's economic recovery was insufficient.

After two consecutive years of contraction in 2019 and 2020, Japan's economy will turn to slow expansion in 2021, with real GDP growing by 1.6%.

Weak economic growth not only limits the market's confidence in the yen, but also makes it an inevitable choice to stimulate economic development through easing policies.

　　Japan's low inflation rate also provides room for loose monetary policy.

In March, Japan's CPI increased by 1.2% year-on-year, the first time it exceeded 1% since October 2018; the core CPI recorded an annual rate of 0.8%, the seventh consecutive month of growth.

However, this still falls short of the 2% inflation target set by the Japanese government in January 2013.

People walk through an intersection in front of Shibuya Station, Japan.

Photo by China News Agency reporter Lv Shaowei

How much does the yen's "continuous fall" affect?

　　There are voices that the fall in the yen seems to bring more vitality to Japan's exports.

Major Japanese exports such as cars or consumer electronics could become more competitive, especially against export giants such as Toyota Motor and Sony Group.

　　However, at the same time, the depreciation of the yen may put Japan, which is heavily dependent on imported resources, in a severe test of its trade deficit, especially as geopolitical factors push up international energy prices.

　　From the perspective of fiscal year 2021, due to the sharp rise in the prices of crude oil, coal, and liquefied natural gas in the international market, Japan's imports far exceed its exports.

In fiscal 2021, Japan's imports increased by 33.3%, while exports increased by only 23.6% in the same period. In this fiscal year, Japan once again turned from a trade surplus to a trade deficit.

　　Nihon Keizai Shimbun estimates that if the yen continues to weaken and crude oil prices rise to $130 a barrel, Japan’s current account deficit will reach 16 trillion yen in fiscal 2022.

　　Some media pointed out that from the perspective of the global capital market, the sharp depreciation of the yen has provided a large amount of funds to the market on the one hand, and on the other hand, it has also buried hidden risks for the financial market.

The depreciation of the yen may make the choice of monetary policy in other countries more difficult.

Due to high inflation, many countries need to raise interest rates to respond, but the resulting exchange rate headwinds may damage the exports of these countries.

A weaker yen also has the potential to increase the risk of competitive devaluation.

　　Wang Youxin, a senior researcher at the Bank of China Research Institute, said in an interview with Zhongxin Finance that if the intervention factor is not considered, the yen will continue to suffer downward pressure in the short term.

Japan's economic recovery is weak, and the three-year average GDP growth rate (2020-2022) is expected to remain negative. Japan will continue to maintain its loose monetary policy, and the Japan-US interest rate gap will continue to widen.

　　"However, if the continued fall in the exchange rate leads to intensified capital outflows and is transmitted to Japan, it will increase the downward pressure on the Japanese stock market and have a greater impact on Japan's domestic financial stability. In this case, the Bank of Japan may take some stable measures. Measures to prevent the situation from slipping further into a negative spiral." Wang Youxin said.

Will the yen's slump affect China?

　　Wang Youxin pointed out that considering that Japan's energy, industrial metals, intermediate parts and other production materials are heavily dependent on imports, the depreciation of the yen and the rise in commodity prices will increase the pressure on import costs, and the price increase will be transmitted to the export side, weakening the impact of the depreciation of the yen on Japan. The boost to exports, therefore, poses little threat to China's export competitiveness.

Moreover, the depreciation of the yen has reduced the pressure on China's foreign exchange payment for imports from Japan, which is beneficial to Chinese importing enterprises.

　　"But for Chinese companies that have export business in Japan, if the transaction is settled in yen, they should be alert to the risks associated with the decline of the yen exchange rate on corporate profits and financial operations." Wang Youxin said.

(Finish)