Exchange Rate in Japan
Japan - Exchange Rate (average of period)
Japanese authorities’ multibillion FX interventions fail to boost the yen
The Japanese yen has fallen 3.9% against the U.S. dollar over the last month—briefly reaching a 32-year low—and by 23.6% year to date. After a USD 20 billion intervention last month, Japanese authorities made another intervention on 21 October worth at least USD 30 billion, according to the Financial Times. Recent news reports suggest a third has been conducted this week. Regardless, this hasn’t been enough to significantly boost the yen. The reason is simple: the U.S. Fed has raised its policy rate by 300 basis points so far this year and has signaled around 150 basis points of additional tightening, while the Bank of Japan (BoJ) has insisted that rates will not rise for the foreseeable future.
Although the yen is seen remaining weak in the near term, all of our panelists see the currency recovering some of its recent losses by the end of 2023. With USD 1.2 trillion in international reserves, the Japanese authorities have the firepower to deter further advances by the dollar beyond the JPY 150 per USD mark. This will buy BoJ Governor Haruhiko Kuroda enough time to wait out the end of the U.S. Fed’s hiking cycle—expected in Q1 2023—following which there should be a gradual easing in the yield gap between benchmark U.S. treasuries and Japanese bonds.
One upside risk is a change in monetary policy: ditching negative interest rates and “yield curve control”—the cap on 10-year government bond yields. A recent poll suggested a slight majority of Japanese want the BoJ to review its ultra-accommodative monetary policy, suggesting pressure on BoJ Governor Kuroda to tighten monetary policy is growing. If monetary policy were tightened, this would reduce the interest rate differential between Japanese and U.S. assets, which in turn would boost the yen. Other key factors to watch include energy prices and the pace of the U.S. Fed’s rate hikes.
Japan - Exchange Rate (aop) Data
|Exchange Rate (vs USD, aop)||121.1||108.8||112.2||110.5||109.0|
5 years of economic forecasts for more than 30 economic indicators.
Japan Exchange Rate (aop) Chart
Source: Thomson Reuters
|Bond Yield||-0.02||-4.41 %||Dec 30|
|Exchange Rate||108.7||-0.35 %||Jan 01|
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Japan: Japanese government unveils JPY 29.1 trillion (USD 200 billion) supplementary budget in November
November 22, 2022
On 8 November, the Japanese government unveiled a JPY 29.1 trillion (USD 200 billion) supplementary budget—worth around 5% of GDP. Around 25% of it will be spent on shielding businesses and households from rising inflation via electricity and fuel subsidies, and measures to boost wages. Additional funds will be spent on initiatives to boost wealth equality, disaster resilience and national security. Impact on inflation: The Japanese government has claimed that the budget will bring down inflation by 1.2 percentage points between January and September next year.
November 18, 2022
Inflation rose to 3.7% in October, above September’s 3.0%.
November 17, 2022
Yen-denominated merchandise exports rose 25.3% over the same month last year in October, weaker than September’s 28.9% jump.
November 16, 2022
Core machinery orders—which cover the private sector, exclude volatile orders and are a leading indicator for capital spending over the coming three-to-six-month period—decreased 4.6% in month-on-month seasonally -adjusted terms in September, which was a smaller drop than August's 5.8% decrease.
November 15, 2022
Industrial production decreased 1.7% month-on-month in seasonally-adjusted terms in September (August: +3.4% mom).