The value of the Japanese yen has fallen to its lowest level this year. Goldman Sachs, an American investment bank, predicted that the yen-dollar exchange rate could reach 155 yen within this year.
On the 13th (local time) in the New York foreign exchange market, the yen-dollar exchange rate rose to 151.92 yen per dollar (the value of the yen fell), approaching last year’s high of 151.94 yen. If the yen-dollar exchange rate breaks this record, the value of the yen will be at its lowest in 33 years since 1990, at the beginning of the collapse of the bubble economy.
In Japan, a decline in the value of the yen will be beneficial to export companies, but there are high concerns that it will stimulate the prices of imports, including oil raw materials, and make life difficult for ordinary people.
Japan maintains negative interest rates to escape deflation (falling prices during an economic recession), and the interest rate gap with the United States, which has entered into a prolonged period of high interest rates, is widening and the yen is continuing to weaken. In particular, as the US 10-year Treasury yield (interest rate) exceeded 5% at one point last month, the ‘yen carry trade’, which involves selling yen with low interest rates and buying dollars, became active, and the value of the yen is falling further.
Accordingly, after the central bank, the Bank of Japan, decided at the end of last month to effectively allow the 10-year government bond interest rate to rise, the yen-dollar exchange rate, which fell below the 150 yen level early this month, rose again, bringing the value of the yen to its lowest level in 33 years. Until last month, the global financial market viewed 150 yen per dollar as a psychological resistance level, but now it is taken for granted that this line has been crossed.
The Nippon Keizai Shimbun analyzed, “If the forecast spreads that the U.S. Consumer Price Index (CPI) will not rise as much as expected, the dollar is likely to strengthen as expectations of the U.S. Federal Reserve’s interest rate cut next year are dampened.” did.
Japanese Finance Minister Shunichi Suzuki said on the 14th, “The basic idea is that excessive fluctuations in the exchange rate are undesirable,” and added, “The Japanese government continues to make full preparations.”
The record low yen could also hurt Korean exports. The price competitiveness of Korean products may be pushed back, especially for products competing for export with Japan. Seong Tae-yoon, professor of economics at Yonsei University, said, “As the value of the yen falls in the global market, Korea’s price competitiveness is bound to fall behind.” There are also concerns about a negative impact on the travel balance. Seok Byeong-hoon, a professor at the Department of Economics at Ewha Womans University, explained, “As the low yen phenomenon continues, there is a high possibility that the number of domestic tourists flocking to Japan will increase, fueling the sluggish service balance.”
The falling yen is leading to entrepreneurship (yen + investment), with more people buying yen at low prices for investment purposes in the domestic financial market. According to the financial industry on this day, the balance of yen deposits at the five major commercial banks, including KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup, was 1.1407 trillion yen (about 9.92 trillion won) as of the 7th. It increased by 91.8 billion yen (approximately 800 billion won) in just one week from 1.0489 trillion yen at the end of last month. On the other hand, it acts as bad news for investors in financial products such as exchange traded funds (ETFs) that invest in the yen.
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Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.