On September 22nd, the government and the Bank of Japan finally took action against the accelerating depreciation of the yen.

The first dollar-selling yen-buying market intervention in 24 years.

The yen exchange rate temporarily rebounded sharply in the direction of yen appreciation, but the yen is depreciating again.

“Excessive volatility due to speculation cannot be overlooked.”

We interviewed how the market received this message from the government and the Bank of Japan.

(Economics Department reporter Kentaro Makata)

Largest ever yen-buying intervention

First of all, from the data on the scale of market intervention that was attracting attention.



According to the Ministry of Finance announced on the 30th, the total amount of market intervention implemented in September reached 2.8382 trillion yen.



The amount of dollar-selling/yen-buying market intervention conducted in a single month exceeded the amount of 2,815.8 billion yen that was implemented 24 years ago in April 1998, making it the largest ever.



Immediately after the intervention, the yen exchange rate rose by more than 5 yen, reaching the low 140 yen level to the dollar at one point.



However, after that, the yen was sold again and returned to the upper 144 yen level.

What is the reception of the market?

Market participants are divided on the intervention.



"It served as a warning to the market," and "Without the intervention, the yen could have depreciated rapidly to 146 yen to 147 yen against the dollar." There were many voices questioning the effect, such as "The effect did not last long despite the huge amount of money spent" and "The trend of yen depreciation will not change while the interest rate differential between Japan and the United States is widening."

What are the “speculators” that the government and the Bank of Japan are aware of?

By the way, what the government and the Bank of Japan were paying attention to in their market interventions was the movement of "speculators."



At a press conference on Sept. 22, when he took the plunge to intervene, Finance Minister Suzuki warned in a strong tone that "excessive fluctuations due to speculation cannot be overlooked."

Finance Minister Kanda also justified the market intervention this time, saying, "Fundamentals = speculative problems that deviate from the basic conditions of the economy must be corrected."



On the same day, Bank of Japan Governor Kuroda said, "I believe that the depreciation of the yen is one-sided, and that there are also speculative factors."



In this way, the "speculators" named by the government and the Bank of Japan as the players leading the depreciation of the yen.



What do the terms “speculative” and “speculative” actually mean?



One of the officials said, ``It is an investor who moves a large amount of money in the market and repeats short-term trading to earn a profit margin. Specifically, it is assumed to be an overseas hedge fund.'' I answered.

European hedge funds answer

So, did this market intervention have the effect of keeping speculators in mind, which the government and the Bank of Japan are aware of?



I wanted to directly hear the thoughts of players who are considered "speculators", so I applied for interviews with multiple domestic and foreign hedge funds.



Most of them answered that they could not comment.



Meanwhile, a representative of a European hedge fund responded to the interview as follows.



"I don't appreciate market intervention at all. Unless U.S. interest rates fall, the trend of yen depreciation will continue. Until the Japanese government realizes that it is rapidly depleting its dollar reserves, with little effect. We will continue to intervene."



The government and the Bank of Japan are ready to intervene further, but this hedge fund is bullish, saying that even if there is a second or third market intervention, it will not have the effect of stopping the yen's depreciation.

When is the next market intervention?

How does the market view the timing of the next intervention?



This time, we interviewed 10 domestic analysts, and 6 of them believe that 1 dollar = 145 yen is a de facto defensive line.



It is true that the yen has gradually depreciated since the market intervention, but it has remained at the upper half of the 144 yen level to the dollar, probably due to a sense of caution about the intervention.



On the other hand, all 10 analysts agree on the speed at which the yen depreciates.



Many market participants believe that if the yen depreciates above 145 yen to the dollar and the daily fluctuation range reaches 2 or 3 yen, there is a good chance that the market will intervene. .

Where is the interest of speculators

However, many analysts point out that the current interest of "speculators" such as hedge funds is more in the UK than in Japan.



In the United Kingdom, the Truss administration launched economic measures centered on large-scale tax cuts, but announced a huge increase in the issuance of government bonds, which spread concerns about financial deterioration and led to a drop in the price of government bonds.



Yields soared sharply.

The currency pound also fell sharply against the dollar, temporarily hitting the lowest price since the transition to the floating exchange rate system in 1972.



It is not clear to what extent the ``speculators'' are behind this, but one of the analysts said, ``I would like to see if there are any contradictions in the national policy or if there are any weaknesses in the national power. It's a speculative way to aim at '.



The European hedge fund I mentioned earlier also points out that ``the reality of Japan's huge debt burden means that Japan could quickly fall into a dangerous situation.''



The government and the Bank of Japan have repeatedly argued that it is desirable for the exchange rate to remain stable, reflecting the economic fundamentals, but it is precisely these fundamentals that fluctuate that will expose weaknesses to the market. I would like to take a closer look at the future policies of the government and the Bank of Japan, in addition to the conditions that shape the Japanese economy.

Next week, the Bank of Japan's Tankan (Short-Term Economic Survey of Enterprises) will be released on the 3rd.



According to forecasts by private think tanks and others, there are many opinions that the economic judgment of large companies and manufacturers will improve, but there is also a view that the economic judgment of large companies in the non-manufacturing sector will deteriorate due to the effects of the seventh wave of the new coronavirus. It has come out.



Also pay attention to the US employment statistics that will be announced on the 7th.



Markets are paying close attention to the results of these economic statistics in the United States, as there are concerns that the tightening of monetary policy in the United States will be prolonged and the economy will slow down further.