41 sats \ 6 replies \ @siggy47 26 Oct 2023 \ on: Why the US Dollar is Surging Against the Japanese Yen bitcoin
For a while now the BOJ has been intervening by selling USdollar assets whenever the yen fell below 150 to the dollar. Just recently they decided to exercise yield curve control to maintain their 10 year bond yield at one percent. In other words, the BOJ is intentionally allowing the yen to crash against USD.
For a while now the BOJ has been intervening by selling USdollar assets whenever the yen fell below 150 to the dollar
I don't think they can keep doing that forever. They don't have an unlimited number of us dollar assets to sell
They may have already run out
In other words, the BOJ is intentionally allowing the yen to crash against USD
I wonder if they are trying to make it look intentional. Their other options are so much worse. But I'll bet they wish they could have a strong yen
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Japan has been such a shit show for so long. They've kept rates near zero since the 90s, I think. I think their juggling act is coming to an end. Its always a tradeoff. They like to keep the yen kind of weak so they can sell lots of Toyotas overseas. Foreign manufacturers then can't compete on price.
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A weak yen allows you to export products for a while but if merchants in your country don't raise their domestic prices, foreigners will come into your country and use their hard currency to buy all your domestic products too, and even the means of production, eventually. Your workers may make a little money exporting cars, but they won't have enough money to buy stuff that foreigners already bought. You either end up with inflation or shortage. I don't think you can long have a low exchange rate and low inflation.
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Given the economy's reliance on exports, Japan has historically focused on arresting sharp yen rises and taken a hands-off approach to yen weakness, which is more difficult because yen-buying requires Japan to draw on limited foreign reserves.
Some like John Vail, chief global strategist at Nikko Asset Management, say currency weakness is crucial for Japan's economy to maintain its competitiveness as a secure source of supply-chain diversification.
The above quotes were taken from this article:
https://www.reuters.com/markets/europe/what-are-consequences-yens-fall-20-year-low-2022-06-10/
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Good find. Interesting that last year they were already questioning whether Japan has enough foreign assets to intervene effectively in the fall of the yen.
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I have great difficulty wrapping my head around Japan. I try to get a handle on it, but it's a deep rabbit hole. It's amazing to me that the economy is still afloat. But, from what I read, it's unravelling now.
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