The value of the yen fell against the dollar even at 147 yen, the lowest level in 32 years. At the end of last month, the Japanese government intervened directly in the foreign exchange market by buying the Yen for the first time in 24 years. Nevertheless, within a month, the value of the currency fell to the level it was at the time of the collapse of the bubble.
On the 13th (local time) in the New York foreign exchange market, the yen value of the dollar fell to 147.66 yen. This is the lowest level in 32 years since August 1990, when the Yen fell to the 160 yen level due to the collapse of the bubble. The US consumer price index (CPI), released the day before, rose 8.2% from a year earlier, beating market consensus.
○ “Japan’s economic collapse revealed”
Analysts say that the central bank of the United States (Fed), which declared ‘war on inflation’, is raising the benchmark interest rate again, and the market has accepted a scenario where interest rates in the United States and Japan will expand.
The yen to the dollar, which was 115 yen at the beginning of this year, has fallen by 32 yen for the first time in nine months. This is the biggest drop since 1973, when Japan’s exchange rate system moved to a floating exchange rate system. As the dollar continues to dominate, other major currencies such as the euro and the pound are also weakening. The value of Japan’s currency fell even more sharply as its weak economic structure was exposed to the difference in interest rates between the US and Japan, which was close to 4 percentage points.
The Nihon Keizai Shimbun pointed out that “the inadequacy of the Japanese economy was revealed only in the failure of the Bank of Japan to normalize monetary policy.” It is explained that the chronic deficit in the trade balance creates an uncontrollable sale of the Yen due to the energy procurement structure which depends on imports and the relocation of manufacturing facilities abroad.
However, Bank of Japan Governor Haruhiko Kuroda reiterated that he would continue with a negative interest rate policy, saying, “Japan’s economy is recovering more slowly than the United States, so it is not appropriate to return to a tightening policy financial. ” Governor Kuroda is visiting Washington, USA to attend a meeting of finance ministers and central bank governors of G20 countries together with Finance Minister Junichi Suzuki.
Finance Minister Suzuki said on the same day that “excessive fluctuations in the exchange rate caused by speculative forces are unacceptable,” and “we will take appropriate measures.” This indicated that large-scale monetary easing policies could continue, but intervene again in the foreign exchange market. However, market participants question the effectiveness of the Japanese government’s intervention. This is because there is no way to stop the weakening of the Yen unless structural factors such as the widening of the US-Japan interest rate gap are removed.
○ Asia defends the exchange rate
Currency depreciation due to the strong dollar is not unique to Japan. Asian countries are depleting their foreign exchange reserves to protect the value of their currencies. Citing the financial information company Axant Data, Bloomberg News reported that Asian countries excluding China spent $89 billion (about 127 trillion won) of their foreign exchange reserves this year and up to last month to protect the rate exchange This is the highest in 14 years since the global financial crisis in 2008.
We spent a lot of money last month, especially when the dollar was strong. These countries invested $50 billion last month alone. This is the largest amount since March 2020, at the start of the COVID-19 pandemic. Of the $50 billion, Japan spent about $20 billion. The remaining $30 billion was estimated to have been spent by South Korea, Hong Kong, India, Indonesia, Malaysia, the Philippines, Singapore, Taiwan and Thailand.
South Korea invested $17 billion, Bloomberg reported.
Tokyo = Reporter Young-hyo Jeong / Reporter Lee Go-woon hugh@hankyung.com
