On July 11th local time, the exchange rate of the US dollar against the Japanese yen soared to 157.40, with a maximum increase of nearly 3%, marking the largest daily increase since the end of 2022.
As of press time, the US dollar has returned above the 159.00 level against the Japanese yen.
It is worth noting that the Nikkei index fell more than 2% in early trading, and as of press time, it was at 41406.54 points, a decrease of 1.94%.
According to CCTV News, on July 11th local time, Japanese government officials revealed that the Japanese government and the Bank of Japan have intervened in the Japanese yen exchange rate in the foreign exchange market.
On the night of the 11th, Japanese Finance Ministry Finance Officer Shinobu Kanda stated that the Japanese yen had significantly rebounded and could not disclose whether any market intervention had been carried out.
After a short-term drop of 160 points against the Japanese yen, the US dollar/JPY quickly wiped out all the losses, and fluctuated continuously in a wide range of over 100 points during the Asian session.
According to China News Service, the speed and magnitude of the yen's rise have made the market wary of the possibility of the Bank of Japan intervening in the exchange rate. The authorities intervened as early as early as May to support the yen exchange rate.
Samir Samana, Senior Global Market Strategist at the Investment Research Institute of Wells Fargo, said, "Given the trend of the US CPI, it is difficult to distinguish between the two. Given that the largest part of this volatility occurred before and after the release of the US CPI, I believe it is more of a CPI induced volatility rather than human intervention. They may also have done something at night
HELEN GIVEN, a foreign exchange trader at MONEX USA, believes that "in the past few months, traders have been speculating that Japan's potential intervention in the exchange rate may raise funds by selling its holdings of US treasury bond bonds, so the sharp decline of the yen will have a greater impact. It is also necessary to observe whether the sharp fluctuations of the yen will continue in the coming week, but this is undoubtedly good news for the Bank of Japan."
It is worth mentioning that in the current wave of US dollar interest rate hikes, the Japanese yen is one of the currencies that has depreciated significantly against the US dollar. At the beginning of 2021, the US dollar/Japanese yen exchange rate fluctuated between 100 and 110, but in July 2024, the US dollar/Japanese yen briefly broke through the 160 mark, with an overall decline of about 50%.
According to CCTV News, the Financial Times reported that the Bank of Japan is facing a "huge dilemma": on the one hand, it needs to raise interest rates to stabilize the exchange rate; On the other hand, Japan's weak domestic demand makes it difficult to support rapidly increasing interest rates, and raising interest rates in the short term is not feasible.
Japanese economists say that the statement by Federal Reserve officials that they are not in a hurry to cut interest rates has kept the interest rate differential between Japan and the United States at a significant level, which is the main reason for the sharp decline in the yen exchange rate.
According to CCTV News, Hiroshi Nagahama, Chief Economic Analyst at Japan's First Life Economics Research Institute, believes that the depreciation of the Japanese yen has brought benefits to Japanese export companies, but the accompanying increase in import prices has also put pressure on many small and medium-sized enterprises. For international enterprises, profits in the international market have increased, and they can gain profits from it. But for enterprises developing domestically, that is, small and medium-sized enterprises, and enterprises with high domestic demand, their cost burden is also increasing with the rise of import prices.
CCTV News Video Screenshot
Yoshihiro Nagahama also stated that the Japanese government may be waiting for the release of inflation related data from the United States before intervening. The reason for not intervening in the market now is that the United States will release important inflation related indicator data this weekend. If the data is higher than market forecasts and the US dollar appreciates while the Japanese yen continues to depreciate, foreign exchange intervention at this time should be more effective.
According to CCTV Global News Broadcast on June 11th, data from the Japanese Ministry of Finance shows that as of the end of May, Japan's foreign exchange reserve balance decreased by $47.4 billion compared to the end of April. According to analysis, the Japanese government and central bank implemented exchange rate market intervention measures from the end of April to the end of May, with large-scale buying of Japanese yen and selling of US dollars, which was the main reason for the decline in foreign exchange reserves.
After investing a huge amount of foreign exchange reserves to intervene in the foreign exchange market, Japanese Finance Minister Toshiichi Suzuki recently stated that in the future, Japanese regulators should use exchange rate intervention measures "to a limited extent", but at the same time, he also said that the Ministry of Finance does not have a "ceiling" on how much funds can be used.
Wang Jinbin, Vice Dean of the School of Economics at Renmin University of China, stated that "limited intervention" refers to the Ministry of Finance's belief that intervention in the foreign exchange market should not occur "frequently", as Japan's foreign exchange market is characterized by high openness and freedom. In order to maintain this reputation, the Japanese government cannot intervene frequently in the foreign exchange market.
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