What’s going on with the Japanese yen 💴? \ stacker news ~econ

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Japan spent a record ¥9.7885 trillion ($62.25 billion) on currency market interventions between April 26 and May 29 to prop up the yen, marking its first such move since 2022.[1] This massive intervention dwarfed the ¥9.2 trillion spent throughout 2022 and came as the yen plunged to a 34-year low of 160.03 against the US dollar on April 29 before rebounding.[1][3]

The Bank of Japan's ultra-low interest rates and the interest rate gap with other major economies have kept downward pressure on the yen.[3] Japanese firms also tend to reinvest overseas profits rather than repatriating them, reducing yen demand.[3] While a weaker yen aids exporters, it raises import costs, especially for energy.[3]

Prior to the announcement, analysts estimated Japan's April-May intervention around ¥9 trillion based on central bank data.[2][4] The finance ministry confirmed spending over ¥3.5 trillion on May 2 alone after around ¥1 trillion on April 29.[4] Officials warned of further action against "excessively volatile" yen moves.[6]

Sources [1] Japan confirms first currency intervention since 2022 with $62 billion in spending https://www.cnbc.com/2024/05/31/japan-confirms-first-currency-intervention-since-2022.html [2] Japan will release its forex intervention data today, Friday, 31 May ... https://www.forexlive.com/centralbank/japan-will-release-its-forex-intervention-data-today-friday-31-may-2024-20240531/ [3] Japan will struggle to rescue its plummeting currency - The Economist https://www.economist.com/finance-and-economics/2024/04/29/japan-will-struggle-to-rescue-its-plummeting-currency [4] Japan Likely Spent About $23 Billion in Latest Yen Intervention https://www.bloomberg.com/tosv2.html?url=L25ld3MvYXJ0aWNsZXMvMjAyNC0wNS0wMi9ib2otYWNjb3VudHMtc2lnbmFsLWphcGFuLXMtc2Vjb25kLXllbi1pbnRlcnZlbnRpb24taW4tZmVkLXdlZWs%3D&uuid=b37e7436-0865-11ef-9641-28ae60e5c065 [5] Japan Spent Record $62 Billion in Past Month on Yen Intervention https://www.bloomberg.com/tosv2.html?url=L25ld3MvYXJ0aWNsZXMvMjAyNC0wNS0zMS9qYXBhbi1zcGVudC1yZWNvcmQtNjItYmlsbGlvbi1pbi1wYXN0LW1vbnRoLW9uLXllbi1pbnRlcnZlbnRpb24%3D&uuid=17ad41bc-1f38-11ef-bd7b-9c5644b32d07 [6] Japan issues fresh warning on yen drops and signals readiness to ... https://www.japantimes.co.jp/business/2024/05/25/economy/japan-yen-warning-intervention/

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69 sats \ 3 replies \ @Bell_curve OP 2 Jun 2024

A currency intervention is a monetary policy tool used by central banks or governments to influence the exchange rate of their domestic currency against other currencies in the foreign exchange market.

Key Points About Currency Interventions:

It involves the central bank buying or selling its own domestic currency in exchange for foreign currencies, with the intention of raising or lowering the value of its currency.[1][2]
It can be done directly through actual transactions in the forex market (operational intervention), or indirectly through verbal communication and policy signals (verbal intervention).[5]
Interventions aim to stabilize excessive volatility, prevent overvaluation/undervaluation of the currency, support exports/imports, or maintain financial stability.[2][4]
They can be unilateral actions by one central bank, or coordinated multilaterally with other central banks (concerted intervention).[5]
Interventions can be "sterilized" by offsetting the impact on domestic money supply through open market operations, or "unsterilized" by allowing money supply changes.[2][5]
Major currency interventions in recent history include the Plaza Accord in 1985 to weaken the US dollar, and actions by Switzerland and Japan to curb strength of their currencies.[2][4]

So in essence, currency interventions are policy tools that allow central banks to directly influence forex markets and exchange rates, usually with the goal of preventing excessive volatility or misalignment that could harm the domestic economy.[1][2][4][5]

Sources [1] What is "Currency Intervention" | Forex Trading Glossary - Fibo Group https://www.fibogroup.com/products/clients/glossary/currency-intervention/ [2] Currency intervention - Wikipedia https://en.wikipedia.org/wiki/Currency_intervention [3] What Is Currency Intervention? - The Balance https://www.thebalancemoney.com/what-is-a-currency-intervention-1978925 [4] Foreign Exchange Intervention Definition, Strategies, Goals https://www.investopedia.com/terms/f/foreign-exchange-intervention.asp [5] Central Bank Intervention Definition | Forexpedia™ by BabyPips.com https://www.babypips.com/forexpedia/central-bank-intervention

13 sats \ 2 replies \ @Undisciplined 2 Jun 2024

Nice summary

21 sats \ 1 reply \ @Bell_curve OP 2 Jun 2024

Who regulates currency exchange or forex?

13 sats \ 0 replies \ @Undisciplined 2 Jun 2024

I'm not an expert in this. I think it's a mix of unregulated transactions and a network of agreements between nations.

13 sats \ 0 replies \ @cryotosensei 3 Jun 2024

Thanks for curating this for us. I can only hope that the weak yen stimulates more tourism demand, so that the common folks can benefit from tourist spending. Although increased tourism leads to its own set problems like overtourism in Kyoto

13 sats \ 1 reply \ @SatsMate 3 Jun 2024

This, in addition to slow economic growth, high inflation, and weak global growth I think will contribute towards a weak Japanese outlook.

Furthermore, with the Japanese being an importer on a lot of goods (island nation), they must rely on a stronger currency more often than not.

I hope for a short and quick recession so that Japan can prosper once again.

0 sats \ 0 replies \ @Bell_curve OP 3 Jun 2024

Japan has been in a slump since 1990.