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On the battlefield of the global financial market, Japan suddenly began to "rebel" like a dark horse, and the yen and the dollar staged a wonderful counter-kill.
The Japanese economy has long been seen as an ally and follower of the United States, but the recent movement of the yen has made people exclaim:
Could it be that Japan has broken away from the control of the dollar and begun to fight back?
Moreover, the renminbi has also ushered in a rare opportunity to rise;
U.S. Treasury Secretary Janet Yellen is probably in a gloomy mood than the weather, worried about whether the financial turmoil will shake the foundations of the United States.
Opportunities for the RMB
While the yen countered the dollar, the renminbi also ushered in a third historic opportunity.
In the multi-faceted wrestling of the global currency war, the rise of the renminbi has shown multiple benefits.
The strong recovery of China's economy
In the first quarter of 2023, China's GDP grew by 4.5% year-on-year, higher than market expectations.
Foreign exchange reserves remain at around $3.2 trillion, providing a solid foundation for the stability of the renminbi.
The yen countered the dollar
Japan's "rebellion" began to emerge in the second half of 2022.
At that time, the Fed raised interest rates 10 times in a row, sending the dollar index soaring to its highest level in 20 years.
However, in the process, the Bank of Japan has maintained an accommodative monetary policy, maintaining the benchmark interest rate at -0.1%, which has led to a sharp depreciation of the yen against the dollar.
Consequences of loose monetary policy
At one point, the yen depreciated by more than 20% against the dollar, causing Japan's import costs to skyrocket and inflation soaring.
In the face of persistently high inflation and capital outflows, the Bank of Japan intervened three times in September and November 2022, selling dollars to buy yen in an attempt to stabilize the exchange rate.
This move to intervene in the exchange rate directly challenges the Fed's tightening policy.
The yen's counterattack has sparked turmoil in global financial markets and put more pressure on U.S. monetary policy.
The counter-killing of the yen and the rise of the renminbi have made US Treasury Secretary Janet Yellen unable to sit still.
In the face of this series of challenges, Yellen had to speak out and express her concern about the yen's volatility.
Yellen's Anxiety: Japan's Exchange Rate Intervention
In a public speech, Yellen noted that the Japanese government's direct intervention in the exchange rate has weakened the competitiveness of the dollar, which could adversely affect the stability of global financial markets.
Her remarks reflected the United States' concerns about Japan's "rebellion" and hinted at Japan's deepening divergence from the Fed on monetary policy.
U.S. monetary policy
The Federal Reserve's successive interest rate hikes have put the US domestic economy at risk of recession.
Despite the gradual decline in inflation, it remains high above 4%.
At the same time, the weak U.S. housing market, declining consumer spending, and sluggish manufacturing growth have left the Fed with the dilemma of balancing inflation and growth.
The yen's counter-killing and the rise of the renminbi have shaken the dollar's hegemony.
The Fed is trying to lure global capital back to the United States through tightening policy to achieve its goal of "harvesting" emerging markets, but a strong counterattack by Japan and China may make this plan difficult to work.
Yellen is concerned that changes in the global monetary landscape may affect U.S. economic growth and financial stability.
In this currency war, the game between the dollar, the yen and the yuan is intensifying, and it is still unknown who will have the last laugh.
A short-lived victory for the dollar
While the dollar remains strong for the time being, recession risks are rising in the US.
Although the strong dollar has attracted global capital to return to the United States, it has also reduced the competitiveness of US exports and continued to widen the trade deficit.
Japan is cautious in the currency war.
The Bank of Japan's policy adjustment has ensured the stability of the yen exchange rate, so that the yen will no longer passively depreciate in the face of the dollar.
At the same time, the Japanese government launched an economic stimulus package worth 1.2 trillion yen to boost domestic demand and promote economic recovery.
The internationalization of the renminbi is accelerating, and as China's economy recovers, the renminbi will play a more important role in international trade and investment.
It will take time to test whether the renminbi can seize this historic opportunity and occupy a larger share of global currencies.
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Text: Wind
Audit|Ancient Oasis, Thousand Trees