Recently, there has been a series of alarming changes in the global currency market. In particular, the sharp ** of the US dollar index has led to a rush of other currencies**. The RMB exchange rate is particularly obvious, with 2,000 points in the offshore market. And the exchange rate of the yen changed confusing and did not move as sharply as expected**. Although the yen has just returned to within 150 against the dollar, it is still far behind the gains of other currencies. Since the beginning of this year, the yen has depreciated by 14%, which further indicates that there are other factors affecting the yen exchange rate in addition to the interest rate differential between the dollar and the yen. This has sparked concerns and speculation about the Japanese economy.
Over the past period, the Japanese economy has improved. First of all, under the continuous stimulus of the Bank of Japan, inflation began to have a clear upward trend, ending a long period of deflation. The latest data showed that core inflation reached 29%。Although the market expects the Bank of Japan to raise interest rates, they still choose to maintain a low interest rate policy, hoping that inflation will persist for some time. In addition, tourism has also seen a clear post-pandemic recovery, with arrivals already exceeding pre-pandemic levels in October, complementing Japan's lack of consumption. However, Japan's declining spending power could have a bigger negative impact. On the one hand, the constant price of goods has led to a decline in real purchasing power, and on the other hand, the real wages of Japanese people have continued to fall. In addition, exports are also a driver of the Japanese economy, but in the first three quarters of this year, Japan's exports fell year-on-year. Under the combination of multiple factors, Japan's GDP growth rate turned negative in the third quarter of this year, which was in line with market expectations of **0The actual figure is more pessimistic compared to 4%. This raises the question of the need for the Bank of Japan to acknowledge reality and make changes.
The challenge for the Bank of Japan is that it must make adjustments. At the time of the change, the new governor Kazuo Ueda should have taken measures early, but after he took office, he almost copied the original monetary easing policy and insisted on not raising interest rates, resulting in the yen continuing to be sharply**. Unlike the previous governor, who took three bailouts when the yen was sharply **, the current governor did not come to the rescue after the yen fell below 150 again. What is even more surprising is that Japan has not continued to sell US bonds for three consecutive months, but has instead bought US bonds. This is actually weighing on the yen and supporting the dollar. This kind of operation is confusing. Fortunately, in the latest monthly data, Japan corrected its mistake in time and rejoined the sell-off in US bonds. However, data from Japan's Ministry of Finance show that in the same month, Japanese private funds increased their holdings of U.S. bonds and withdrew from their own financial markets. Such a massive withdrawal of funds is likely to mean that Japanese investors are bearish on the future of their economies. At the beginning of this year, there was a belief that the Bank of Japan would end its negative interest rate policy next year, and this proportion has risen from 52% in September to 85% today. If interest rates are raised from next year, the yen exchange rate is likely to rise sharply. At the moment, the key is to look at the specific decisions of the Bank of Japan. If they are determined to bring real interest rates to positive territory, that is, to let nominal interest rates exceed inflation, then they will need to raise interest rates by at least 250 basis points. This will significantly narrow the interest rate differential with the US dollar, and may even reverse due to a sharp rate cut by the US dollar. If this happens, a sharp appreciation of the yen is inevitable, and at the same time it may lead to a further increase in the value of the dollar. What exactly will the Bank of Japan decide?Is it following the trend**, or is it falling with the dollar?Now let's wait and see.
The turmoil in the global financial markets has had a profound impact on the development of the Japanese economy. In recent years, the world's economies have become increasingly interconnected, and financial markets have become increasingly volatile. The U.S. dollar's status as a global reserve currency determines the impact of its fluctuations on other currencies. As the world's third-largest economy, changes in Japan's currency and economy will also have a significant impact on other countries.
Over the past few months, the sharp ** movement of the dollar index has triggered large fluctuations in global exchange rates. The currencies of various countries have changed**, and the exchange rate of the yen has also fluctuated. However, compared to other currencies, the appreciation of the yen is relatively small, and sometimes it even depreciates. This phenomenon raises questions about the state of the Bank of Japan's policies and the economy.
The Bank of Japan has been pursuing a policy of monetary easing, stimulating economic growth and inflation through large-scale purchases of government bonds and other financial assets. However, this policy did not lead to a significant increase in the yen exchange rate, as expected. On the contrary, the yen has continued to depreciate over the past few months, making the Japanese economy more challenging. Although the Japanese economy has improved in some areas, such as rising inflation and the recovery of tourism, there are still some problems. The decline in consumption power and exports pose a threat to economic growth, while the successive declines in real wages have weakened the purchasing power of the population to a certain extent.
An important decision facing the Bank of Japan is whether to end the negative interest rate policy and raise interest rates. Some economists** believe that next year the Bank of Japan may end its negative interest rate policy and bring real interest rates back into positive territory, which could lead to an increase in the yen exchange rate. However, specific decisions need to be further observed. If the Bank of Japan decides to raise interest rates, this will narrow the interest rate differential with the US dollar, which could lead to an increase in the value of the yen, while also possibly putting further ** pressure on the US dollar.
Overall, the Bank of Japan (BOJ) faces a series of challenges amid the current turmoil in global financial markets. They need to prudently adjust monetary policy to support economic growth and keep the exchange rate stable. At the same time, the Japanese economy needs to be further resilient through measures such as boosting consumption, raising wages, and boosting exports. Only by taking these factors into account can Japan better adapt to changes in global financial markets and achieve stable economic growth.