Recently, around the fluctuation of the yen exchange rate, Tokyo and Washington, the old enemies, have been involved in a new round of war of words!
On May 1-3, the yen saw a rare three-day winning streak. At first, the pair rose from 160 to 151.87, an impressive 5%. Such exchange rate fluctuations are indeed very rare under normal circumstances. As the market is puzzled, there is a widespread suspicion that the Bank of Japan has secretly intervened in the currency market in order to maintain the stability of the yen exchange rate.
It is understood that behind this continuous rise lies a series of details. First, there have been recent signs of a large influx of funds into Japan in the international market, especially from some foreign investors. This inflow of funds not only led to the rise of the yen's exchange rate, but also to optimism about the prospects of the Japanese economy.
However, with a wave of her hand in her colourful manner, US Treasury Secretary Janet Yellen neatly put an end to speculation about Japan's intervention in the yen's exchange rate. She openly declared that Japan's intervention in the yen exchange rate was a pure rumor and expressed her willingness to consult with the Japanese government.
After close research and verification, Treasury Secretary Yellen concluded that the Bank of Japan did not intervene in the foreign exchange market. According to her explanation, the recent rise in the yen is due to market factors and investors' optimism about the prospects of the Japanese economy and has nothing to do with any official intervention.
She said publicly that the United States will continue to hold close consultations with Japan and hold in-depth discussions on bilateral exchange rate issues. She stressed the importance of maintaining exchange rate stability and protecting fair competition in the market. The consultations between the two sides aim to ensure that there is no form of exchange rate manipulation or improper intervention in order to maintain the health and stability of global financial markets.
Before the words fell, the yen fell twice in a row, and once repeated the mistake of below 151, with a minimum of 154.66. This makes people wonder if Yellen hit a "heavy punch" and directly smashed the yen on his back?
Some experts believe that if the Bank of Japan really chooses to remain silent and not intervene in the market this time, the yen is likely to fall back to the trough of 160. This will undoubtedly cause serious exchange losses to export enterprises, making matters worse.
Against the backdrop of a stronger yen, Japanese exporters are under intense pressure. A drop to the exchange rate of 160 will make Japanese goods more expensive on the international market, reducing competitiveness. Exporters will face smaller foreign exchange earnings and rising costs, which could lead to lower margins and pressure on production capacity and employment.
In particular, for those industries that are highly dependent on exports, such as automobile manufacturing, electronics and machinery manufacturing, exchange losses will be a heavy blow. Companies need to pay higher costs to buy raw materials and hire labor, while revenues are cut by reduced export earnings. Not only will this have a negative impact on the operation and growth of businesses, but it can also lead to higher unemployment and a slowdown in overall economic growth.
In order to cope with this situation, some export enterprises may take some measures to mitigate the impact of foreign exchange losses, such as adjusting sales prices, finding new markets, increasing the added value of products, etc. At the same time, governments and central banks can intervene accordingly, such as through monetary policy or intervention in the foreign exchange market to stabilize the exchange rate, and provide support and assistance to affected enterprises.
Of course, although the Japanese side chose to remain silent, it does not mean that they have nothing to resist. In the arena of currency wars, Japan has always been known for its resolute and decisive actions.
As one of the world's major economies, Japan has a strong central bank and government power and can take a range of measures to stabilize the exchange rate and support the export industry. The Bank of Japan has always had a flexible monetary policy tool that can influence the movement of the yen by intervening in the foreign exchange market or adjusting the level of interest rates.
In addition, the Japanese government can also adopt fiscal policy measures to support companies affected by foreign exchange losses. For example, tax cuts or subsidies are provided to help businesses reduce production costs, protect jobs and boost economic growth. In addition, Japan can cooperate with other countries in the international arena to promote coordinated actions to jointly maintain a stable financial order and trade environment.
In addition, the Japanese government and business community have been focusing on technological innovation and upgrading the industrial structure to improve the added value and market competitiveness of products. This will not only help companies better cope with the challenges of exchange losses, but also help promote economic diversification and sustainable development.
Therefore, although Japan has chosen to keep a low profile for now, they have sufficient economic strength and countermeasures to effectively withstand the negative impact of the exchange rate and ensure stable economic growth. Needless to say, Japan has always been seen as a "ruthless man" in currency wars, ready to show their strength and determination at any time.
Personal Opinion:
Judging from the current situation, both sides are weighing the pros and cons, and are temporarily in a game deadlock. On the one hand, Yellen wants to help export companies reduce the burden of foreign exchange, but on the other hand, she does not want the yen to depreciate excessively and affect the Fed's interest rate hike expectations.
Japan, on the other hand, may be secretly accumulating strength and waiting for the time to strike back. It needs to balance the contradiction between export competitiveness and inflation expectations.
The fuse of this currency war has been lit, and both sides are eyeing each other, and the undercurrent is surging. The world's major economies are looking for their own "killer features" to deal with exchange rate fluctuations and economic challenges.
On the one hand, Japan's monetary policy measures as a major exporter have been attracting attention. They can influence the movement of the yen by intervening in the foreign exchange market and adjusting the level of interest rates. In addition, Japan can also adopt stimulus fiscal policy measures to boost domestic demand and increase export competitiveness. The Japanese government also pays attention to technological innovation and industrial upgrading to enhance the added value and market competitiveness of products.
On the other hand, other economies will not sit idly by. Some countries may take similar measures to safeguard their own economic interests. They can adjust the value of their currencies by intervening in the foreign exchange market, adjusting interest rates, adopting fiscal stimulus, etc., to increase export earnings or curb import inflation.
In addition, there are some potential "killer features" in the global economic landscape. For example, some countries can use cross-border cooperation and trade arrangements to stabilize exchange rates and work together to boost economic growth. There are also emerging technologies and financial instruments, such as blockchain technology and digital currencies, that are expected to play an important role in economic exchanges and capital flows.
In the arena of this currency war, both sides have their own strategies and means. However, it remains to be seen who will have the more lethal "killer feature" and who will be better able to cope with the challenge. The global community is waiting to see who can stand out from the crowd and gain a bigger edge in this fierce competition.