The yen exchange rate accelerated to the upper 144 yen level against the dollar, and has continued to fluctuate wildly.
The next focus of the market is the meeting to decide monetary policy in Japan and the United States.
Both results will be announced on the 22nd of Japan time.
We have another announcement to watch today.
It is the meeting that decides the monetary policy of the Swiss National Bank, the central bank of Switzerland.
Market participants say, "Depending on the results, the yen may depreciate further, and 'certain transactions' may become active."
(Economic Department reporter Mitsutaka Saito)
Only Japan remains in negative territory
Why is the Swiss National Bank's monetary policy meeting drawing attention?
That is because it is seen that the negative interest rate policy may end at this meeting.
Negative interest rate policy was adopted by some central banks as an unusual policy for the purpose of overcoming deflation and revitalizing the economy.
However, in July this year, the ECB = European Central Bank ended this policy as it raised interest rates.
The Danish central bank, which introduced the world's first negative interest rate policy in 2012, also raised the interest rate on September 8 local time and lifted the negative interest rate policy.
As a result, of the 38 member countries of the OECD, only Switzerland and Japan currently have negative interest rate policies.
However, the Swiss National Bank raised the interest rate for the first time in 15 years in June, raising the policy rate from minus 0.75% to minus 0.25%.
For this reason, if the Swiss National Bank raises interest rates on the 22nd and leaves the negative zone, Japan will be the only country to adopt a negative interest rate policy.
There is a view that when the yen is perceived as a "negative interest rate currency," certain transactions will become active against the backdrop of low interest rates.
It is a transaction called “yen carry trade”.
What is Yen Carry Trade?
Yen carry trade, also known as "yen borrowing", is a method of borrowing funds in yen, which has a low interest rate, and investing in a currency with a higher interest rate to earn a profit margin.
For example:
・Overseas hedge funds apply for yen loans from banks and securities firms in their home countries.
・Banks that received applications from hedge funds procured yen through interbank transactions through their bases in Japan.
Send money to your home country.
・Hedge funds raise yen from banks and purchase and invest in high-yield currencies and high-yield bonds.
・The hedge fund will repay the borrowed yen.
The profit is the difference after paying interest on the yen borrowed from the investment profit.
Active yen carry trade?
According to market participants, the scale of the yen carry trade can be read from the Bank of Japan's "branch accounts," which aggregate remittances between the branches of foreign banks in Japan and their head offices.
This is because, if the yen carry trade becomes active, it is expected that the amount of yen procured in Japan by the branches of foreign banks in Japan will be remitted to the head office.
``Head office and branch accounts'' were 6.1 trillion yen in January this year, but are on an upward trend to 11.1 trillion yen in May, 13.6 trillion yen in June, and 10.3 trillion yen in July. is in
However, in February 2007, when the yen carry trade was active, it reached 23.1 trillion yen.
The revival of “Mrs. Watanabe”?
Hedge funds and financial institutions are not the only players in the yen carry trade.
The presence of individual investors engaged in FX trading is also increasing.
According to the Financial Futures Association, the value of over-the-counter trading has surged since March as the trend of depreciation of the yen against the dollar accelerated, reaching a record high of 1,230 trillion yen in June since 2008, when records remain. is climbing
Japanese individual investors who trade FX were once called "Mrs. Watanabe" in the world's financial markets.
It is said that there were many women and housewives investors for that reason, which had a big impact on the exchange rate from 2005 to 2007.
Yen carry trade What will happen in the future?
Will these yen carry trades become even more active in the future?
We interviewed Toru Sasaki, Head of Market Research at JPMorgan Chase Bank Tokyo Branch.
“While countries continue to raise interest rates to curb inflation, if a symbolic event occurs in which the Swiss franc exits negative interest rates and the Japanese yen becomes the only currency with negative interest rates, the yen will become a currency for investors considering a carry trade. In addition, it is estimated that the difference between the weighted average of the policy interest rates of 31 central banks, including Japan, and the policy interest rate of the Bank of Japan will exceed 3% by the end of this month. It is the same as around 2005, when the yen carry trade began to increase, and we expect the yen carry trade to become even more active in the future.
On the other hand, another market insider said that if the slowdown in the US economy became clear, the yen carry trade could be unwound and the trend of the yen's depreciation could suddenly change.
Will the yen carry trade become even more active, accelerating the yen's depreciation?
Attention is paid to the policy judgment of the Swiss National Bank, which may be the trigger.
attention schedule
Next week will be Monday, Friday, and a week with many holidays, but there will be a lot of notable events that the market cannot afford to miss.
The most notable is the 22nd.
The results of meetings to decide monetary policy in the United States and Japan will be announced.
While the United States will raise interest rates significantly, market participants expect the Bank of Japan to continue with large-scale monetary easing.
Also, the Swiss National Bank, which was featured in the column, will announce the policy interest rate.
It will be interesting to see if the BOJ ends the negative interest rate policy by raising interest rates.