On the evening of the same day, according to an anonymous source quoted by the Nikkei News, the Japanese authorities intervened again to defend the yen. USD/JPY once fell by 2.6% to 146.23, the biggest one-day drop since March 2020. However, Shinji Kanda, deputy minister of Japan's Ministry of Finance and Japan's highest-ranking foreign exchange official, declined to comment on whether to intervene.
However, the industry is not optimistic about whether the intervention of the Japanese authorities can reverse the continuous depreciation of the yen. DerekHalpenny, head of global market research at Mitsubishi UFJ Financial Group, said in an email to the national business daily reporter, "At least until market participants can determine that the Fed's monetary policy will turn, we can't see the intervention measures (of the Japanese authorities) play a role."
Is the intervention of the Bank of Japan "completely useless"?
According to Bloomberg News, the Japanese yen began to soar against the US dollar on June 2 1 Sunday night 10: 30. In the following two hours, the trading volume of Japanese yen futures on the Chicago Mercantile Exchange was about $25 billion, the biggest one-day drop since June 20 1 16.
Although several Japanese government officials warned the market not to test the intervention strategy many times this week, the yen once fell to a 32-year low of 15 1.95 against the US dollar on Friday. The authorities have repeatedly said that they will take action to curb the unilateral decline of the yen, but some analysts have warned that any intervention by the Bank of Japan will have limited effect because Japan still maintains a low interest rate policy when other central banks raise interest rates.
ZeroHedge, a well-known financial blog, tweeted that the Bank of Japan's intervention last night was totally useless. As can be seen from the chart of USD/JPY, USD/JPY rose all the way after the intervention of the Bank of Japan in September, and this week it broke through the important psychological barrier of 150.
Image source: Zero Hedging In September this year, after the US dollar broke 145 against the Japanese yen, the Japanese government intervened in foreign exchange for the first time since 1998. Throughout September, Japan's Ministry of Finance spent nearly $20 billion to defend the yen.
According to Reuters, Japanese Finance Minister Jun Suzuki issued several warnings this week. Earlier on Friday, he reiterated that the Japanese government cannot tolerate speculation and excessive foreign exchange fluctuations and will take appropriate actions to deal with excessive trends. However, Bank of Japan Governor Haruhiko Kuroda has made it clear that he has no intention to change the ultra-loose monetary policy that led to the depreciation of the yen.
DerekHalpenny, head of global market research at Mitsubishi UFJ Financial Group, said in an email to national business daily, "Japanese Finance Minister Suzuki Shunichi once again expressed his concern about the yen on Friday, but his remarks yesterday were slightly different when the dollar was over 65,438+050 against the yen, involving ensuring that the Japanese government took actions to offset the impact of the depreciation of the yen and maximize the positive impact of the weak yen."
DerekHalpenny further analyzed that if the Ministry of Finance does not take action, it will definitely trigger the selling momentum of the yen in the next few weeks. "Of course, the risk of action by the Japanese authorities will continue, but for the dollar against the yen, Japan has repeatedly stressed that there is no specific level of protection, which means that there is still room for this relatively orderly rise of the dollar against the yen."
The Bank of Japan will hold a two-day policy meeting next week and announce its interest rate decision next Friday, but policymakers have almost ruled out the possibility of raising interest rates to prevent the local currency from weakening. At present, most strategists predict that the Bank of Japan will keep the ultra-low interest rate policy unchanged at the policy meeting on June 28th 10, but some analysts say that the Bank of Japan may need to abandon the YCC policy. Bank of Japan Governor Haruhiko Kuroda has also said that he will continue to implement the current monetary policy to raise wages.
Bipan Lai, head of foreign exchange strategy at Imperial Commercial Bank of Canada, said that covert intervention is only a waste of time-it will not really solve the fundamental problem. To truly stabilize the exchange rate of the US dollar against the Japanese yen, it is necessary to slow down or reverse the downward trend of the long-term interest rate in the United States. Otherwise, the Bank of Japan will have to revise its yield curve control plan.
"As we have said for some time, at least until market participants can determine that the Fed's monetary policy will turn, we can't see the intervention of [Japanese authorities] working. The rise of the US dollar against the Japanese yen reflects that the market is increasingly convinced that the Fed will raise interest rates by 65,438+050 basis points before the end of the year. " DerekHalpenny penny Penny added.
Japanese media: The Japanese government plans to invest more than 20 trillion yen in economic countermeasures.
The reporter of China Business Daily also noticed that the change in the market's expectation of the Fed's interest rate hike on Friday night in Beijing time also led to the decline of the US dollar against the Japanese yen to some extent. Just early on Friday, the yield of 10 US bonds soared to 4.3%, the highest since 2007, while the yield of 10 Japanese government bonds was only 0.25%.
However, the Wall Street Journal, known as the "Fed News Agency", reported on the same day that Fed officials may consider slowing down the pace of radical interest rate hikes. In addition, some Fed officials also expressed concern about a sharp rate hike and discussed slowing down the pace of aggressive rate hikes.
In addition, on the night of 265,438+0 Beijing time, the Japanese authorities intervened in the foreign exchange market, and the news agency reported that Japan was considering spending more than 20 trillion yen (about 65.438+03 billion US dollars) to finance the economic stimulus plan. After the report was released, the dollar rose rapidly against the yen and continued to hit a 32-year high.
According to the report, the Japanese government and the ruling party have begun to coordinate and invested more than 20 trillion yen (about 960 billion yuan) of state funds for comprehensive economic countermeasures centered on responding to rising prices. Among them, measures such as reducing the burden of electricity and city gas, stimulating tourism demand and supporting childcare will be written to ensure that the demand gap of Japan's overall economy is exceeded. It is planned to decide at the cabinet meeting on the 28th to submit the second supplementary budget for 2022 to the Provisional Congress.
It is expected that the scale of the project, including the expenditure of local governments and enterprises, will further increase. As for the financial resources of state funds, it will ensure that the remaining part of the 20021budget and the tax increase in 2022 will be trillions of yen, most of which will be raised by issuing deficit national debt loans.
There are still some opinions of the government and the ruling party that state funds should be further allocated, which may increase the reserve funds for COVID-19's countermeasures and responses to rising prices, or make up for it by using funds. In this case, the priority scale will lead to the tax being used for unnecessary and non-urgent projects, and the fear of further financial deterioration may be intensified.
The government decided to take measures to reduce the burden of electricity and city gas. The electricity fee will be applied from the electricity consumption 1 next year and will last until next autumn. Measures to reduce the burden of liquefied gas mainly used locally are also discussed. At present, the monthly gasoline subsidy of about 300 billion yen is also extended after 1 month.
In addition, we will continue to implement measures to stimulate tourism demand and provide financial support to pregnant women. The "economic security fund" to support enterprises and universities to develop cutting-edge technologies will double to about 500 billion yen.
On the scale of countermeasures, Prime Minister kishida fumio mentioned the downside risks brought by rising prices and overseas economic downturn in his parliamentary reply on the 20th, saying: "Bold and decisive countermeasures should be taken. I hope to formulate a scale that the people can actually feel. " Hirofumi Morita, president of the government investigation of the Liberal Democratic Party, said that the "gap between supply and demand" reflecting insufficient demand would be converted into 15 trillion yen for the whole year, and expressed the idea of actually implementing various measures with the total goal of 30 trillion yen of the same scale as last year's economic countermeasures10.