Witness history! The depreciation of the yen has hit a new low in 34 years, and luxury goods have been sold out! Japanese people go abroad to eat one less meal a day in order to save money

National Business Daily

2024-04-28 11:47Posted on the official account of Sichuan Daily Economic News

Edited by: Bi Luming

According to a report by the Japanese media on the 27th, in the New York foreign exchange market on the 26th, the yen fell sharply against the US dollar, once falling below 158 yen to 1 US dollar, once again refreshing a new low in 34 years. As of the latest data, the yen settled at 158.3430 per dollar, a new 34-year low since May 1990.

According to a report by brokerage China, the depreciation of the yen can prompt foreign capital to enter Japan, which in turn will drive Japanese consumption and increase Japanese inflation. At the same time, it is also beneficial to Japan's exports. Recently, Japan's economic recovery has also been very obvious. As a result, the market believes that Japan seems to be trying to use the currency depreciation to drive the domestic economy to the extreme.

Analysts believe that the sell-off of the yen will increase the demand for the dollar, which in turn will increase the pressure on emerging market currencies. At the same time, the more the yen depreciates, the more likely it is that the Japanese government will intervene. Once the intervention is carried out, the global stock market and foreign exchange market will inevitably have "turbulent waves", which is tantamount to a super "black swan" coming.

At the same time, it is the time of spring break in Japan, and some Japanese people say that the continued depreciation of the yen is putting pressure on planned trips abroad. Some Japanese tourists say that in order to save money, they will eat their own convenience food for breakfast, or simply skip a meal.

The yen exchange rate hit a new low in about 34 years

On the 26th, the U.S. dollar closed against the yen with a bald long white candle, and the yen once depreciated to a maximum of 158.4455 to 1 U.S. dollar, a single-day depreciation of nearly 2% is also rare in history. As of the latest data, the yen settled at 158.3430 per dollar, a new 34-year low since May 1990.

According to the brokerage China, citing data from Bloomberg, the weekly report on positions of the U.S. Commodity Futures Trading Commission (CFTC) showed that in the week of April 23, traders (including hedge funds and asset managers) held more than 184,180 short yen contracts, breaking the record high set in the previous week (since data records began in 2006). Meanwhile, the Japanese yen also fell to its lowest level in nearly 16 years against the euro at 168.23, and against the Australian dollar to its lowest level in nearly a decade.

So, what exactly happened? The Bank of Japan's monetary policy meeting decided on 26 June to keep the current monetary policy unchanged and maintain the policy interest rate target between 0 and 0.1 percent. This may be the main reason. Bank of Japan Governor Kazuo Ueda also made it clear that he has "no intention of saving the weak yen". Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities in Singapore, said there was "little indication that the BOJ is considering raising interest rates in the near term".

Nobuhiko Hiwara, an associate professor at the Business School of Waseda University in Japan, believes that the biggest reason for the depreciation of the yen is not in Japan, but in the United States, where high interest rates are the main reason. The market originally predicted that the United States would cut interest rates three times this year, but the U.S. consumer price index remained high, and expectations for U.S. interest rate cuts fell. The U.S. factor has a stronger impact than the domestic factor in Japan. Whatever the Bank of Japan takes, it will not make much difference. Nobuhiko Hiwara also pointed out that the depreciation of the yen will further raise prices. If the depreciation of the yen continues, it could have a profound impact on the Japanese economy.

The depreciation of the exchange rate has affected the travel of Japanese people abroad

In fact, it can be seen from the actions of the Bank of Japan that the depreciation of the yen has certain benefits for the Japanese economy.

S&P Global reported on Tuesday that Japan's preliminary Jibun composite PMI rose to 52.6 in April, the highest level since August last year. Japan's Jibun manufacturing and services PMIs rose to 49.9 and 54.6, respectively, in April, the highest since May last year. A reading above 50 indicates that the economy is in a state of expansion.

The depreciation of the yen has attracted a large number of tourists to Japan. According to the Japan National Tourism Organization, the total number of visitors in March was 3.1 million, a record high, surpassing 3 million for the first time, an increase of nearly 70% from a year earlier. According to the Japan Tourism Organization, foreign tourists spent 1.75 trillion yen ($11.3 billion) in Japan between January and March, up 52% from the same period in 2019.

However, Japan's own people have been "hurt" when they travel abroad.

According to CCTV News, it is currently the spring break in Japan, and some Japanese people say that the continued depreciation of the yen has brought a lot of pressure to the planned overseas trip.

Resident: I want to go on vacation abroad, but now the yen is depreciating too much.

Image source: Video screenshot

Local resident: We just got married this year and I really want to travel abroad, but it's not so easy now.

While some tourists still choose to travel abroad, the continued depreciation of the yen has forced them to choose countries that are relatively inexpensive or to reduce their travel activities to cut back on their expenses. Some Japanese tourists said that in order to save money, they would eat their own convenience food for breakfast, or simply skip a meal.

Locals: We usually travel to Europe or Australia, but this year, the yen has depreciated so much that we have had to change our destinations.

Image source: Video screenshot

Resident: We started planning this trip half a year ago, and we hoped that the yen would not fall again, but now that the yen has depreciated even more, we don't know what to do now, so we can only reduce some planned activities.

Japanese tourists: In order to save on meals, we sometimes skip breakfast, only have a brunch, and sometimes eat fast food brought from Japan as breakfast, if the exchange rate (of the yen against the dollar) is better, then our trip can be more comfortable.

Luxury brands such as LV have been snapped up in Japan

In addition, the depreciation of the yen exchange rate has led to a surge in the value for luxury goods in the country.

According to a report by Zhongxin Jingwei on April 20, "Japan's LV stores are all Chinese, counting all kinds of discounts, a 20,000 bag can be cheaper by three or four thousand yuan." Ula (pseudonym), who recently traveled to Kyoto and other places in Japan, observed that under the depreciation of the yen, many luxury goods are nearly 10%-50% cheaper to buy in Japan than in China.

Spurred on by this positive news, the sales performance of major luxury brands in Japan surged.

In the first quarter of 2024, LVMH's revenue in the Japanese market surged by 32%, increasing its contribution to the group from 7% to 9%, mainly due to the favorable exchange rate, and a large number of Chinese consumers purchased luxury goods in the Japanese market.

Italian luxury brand Brunello Cucinelli grew by almost 18%, while Asia also performed well. Driven by revenue growth in China, Japan, Korea and the Middle East;

According to the Hermès Group's performance report for the first quarter of 2024, sales in the Japanese market increased by 10.8% year-on-year to 357 million euros;

The Prada Group also had a strong performance in Japan in the first quarter, with retail sales up 46% year-on-year.

The Japanese government has limited room for intervention

According to the global information broadcast of the main station, Hideo Kumano, chief economic analyst of Japan's Dai-ichi Life Economic Research Institute, pointed out that the continuous depreciation of the yen has slowed down the investment and production of Japanese enterprises, and the purchasing power of consumers has declined, which has had a serious negative impact on the Japanese economy.

Hideo Kumano: "There is a perception that a weaker yen will increase the value of foreign assets held by companies, which is good for export-oriented companies, but in fact few people believe that a continued depreciation of the yen will be beneficial to companies and the national economy. For consumers, the negative effects of the yen's depreciation are obvious, with prices of imported goods rising and prices of food and gasoline, which have stabilized so much, rebounding. ”

With the yen hitting its lowest level against the dollar in decades, the market is increasingly concerned about whether the Japanese government and central bank will intervene in foreign exchange.

In response to the sharp depreciation of the yen, Japanese Finance Minister Shunichi Suzuki said in a question in the House of Councillors on the 25th that measures will be taken to deal with the current crisis. But he declined to give further information.

The next day, he reiterated that the current focus of the Japanese government is to deal with rising prices.

It is believed that raising interest rates will help curb further depreciation of the yen.

However, the Bank of Japan decided to maintain the short-term interest rate target at 0-0.1% on the 26th, and only raised inflation expectations slightly.

Investors interpreted the decision as "conservative". In addition to the Bank of Japan having to maintain a cautious monetary policy, it remains to be seen whether the yen will stabilize even if the Japanese government intervenes in the foreign exchange market.

Because from the internal level, the flow of huge private capital is difficult to control.

Moreover, with the Japanese government saddled with more than 100 billion yen in debt, even if the Bank of Japan wants to raise interest rates, it will be constrained in various aspects, especially at the political level. From an external perspective, the change in the Fed's attitude on the issue of interest rate cuts has a significant impact on the trend of the yen exchange rate. In the context of the appreciation of the dollar, it is difficult to stop the momentum of the depreciation of the yen.

As global commodities such as gold and crude oil are still priced in US dollars, coupled with the "tidal effect" caused by the Federal Reserve's interest rate hikes, the strength of the US dollar has caused global commodity prices to rise, and inflationary pressures in various countries have intensified.

Some netizens once said: If there is really any excess "backward production capacity" in the world that affects the balance of the world economy, there is only one - the dollar.

National Business Daily, Global Information Broadcasting, Brokerage China, China-Singapore Jingwei, CCTV News

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