(Image source: Photo.com)
According to Japanese media reports, in the international foreign exchange market on April 29, the yen fell rapidly against the US dollar, once falling below 160 yen to 1 US dollar, for the first time since 1990. The sharp decline in the exchange rate of the yen against the US dollar has brought a series of effects to the Japanese economy and people.
Nobuhiko Hiwara, an associate professor at the Business School of Waseda University in Japan, pointed out that the biggest reason for the depreciation of the yen is the high interest rate in the United States, but not in Japan. He believes that whatever measures the Bank of Japan takes, it will not have much effect, and the depreciation of the yen will further raise prices and have a profound impact on the Japanese economy.
At present, the depreciation of the yen has pushed up the production costs of Japanese companies, which are highly dependent on Japan, and the prices of food and daily necessities in Japan have continued to rise. According to reports, the price of a cabbage can even be as high as 100 yuan, and in order to save money, they will eat their own convenience food for breakfast, or simply skip a meal.
Affected by the collapse of the yen, many Japanese tourists choose to bring rice and other ingredients to the United States to reduce the cost of living abroad.
On the other hand, as the yen continues to depreciate, the prices of some high-end brands in China are much lower than abroad, attracting a large number of tourists to shop in Japan. Daigou also made a lot of money in this yen depreciation turmoil, and some daigou can even earn 10,000 yuan on a trip to Japan.
Fiona Lim, senior FX strategist at Maybank, noted that financial markets are testing Japan's tolerance for a rapidly falling yen. Lim believes that the momentum to effectively fall below the 160 mark per dollar is clearly there, and the pace of depreciation of the yen is accelerating. Lim warned that if the yen continues to fall at this pace without intervention, it could be in greater danger, especially as the Fed may signal a longer wait. She said the possibility of intervention is increasing, especially as there are clear signs of yen speculation. So far, no intervention has been carried out probably because the time is not yet ripe.
The US dollar remains dominant
As of the first quarter of 2021, the dollar accounted for 56% of the world's foreign exchange reserves of US$6,991.2 billion, followed by the euro and the yen, with US$2,415.7 billion and US$692.1 billion, accounting for 19% and 6% respectively.
The peak of the RMB exchange rate occurred at the end of November 2022
From January 2021 to March 2022, the exchange rate of the US dollar against the RMB was generally stable, and there was a slight downward trend, since March 2022, the Federal Reserve has continuously issued interest rate hike plans, and the US dollar has continued to rise against the RMB, reaching a peak of 7.16328 at the end of November 2022.
Hu Jie, a former senior economist in the United States and a professor at the Shanghai Advanced Institute of Finance of Shanghai Jiao Tong University, pointed out that Japan is an export-oriented economy. Therefore, the depreciation of the yen is good for Japanese exports, which is good for the economy in general. On the other hand, the rising cost of imports in Japan will push Japan's inflation rate higher, which will help consolidate its report card of tackling deflation, which can be said to be a phased positive thing.
Shoki Omori, chief strategist at Mizuho Securities, said the yen fluctuated sharply against the dollar on Monday, which may have been due to the lack of liquidity in the Japanese market on public holidays, rather than real intervention. "The fact that the yen market is illiquid during the holiday period means that the yen is inherently volatile," Omori noted. He believes that "the past few days have been too fast, and the market may have taken profits at the 160 and 159.5 lines," and said that algorithm-driven account adjustments may also have contributed to the market's volatility.
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