Economy The weakening of the yen

[Lothor]

That was my initial thought too but I think it's perhaps more likely the dollar will remain strong against the yen on average. If the U.S. gets its fiscal house more in order (even while destroying its society and working class) the markets could remain strong. Of course that's assuming democracy, such as it is, continues to function. There's sure to be a lot of volatility for a while though. It's the uncertainty the markets don't like more so than the actions that have been taken.

Is the U.S. fiscal house currently in disorder? They are one of the countries greater in debt (here's some recent data), but they are also a rich country that can service their debt. The volatility will remain while Trump is there – people like him know no boundaries. I'd be selling my dollars.

 

[mdchachi]

Is the U.S. fiscal house currently in disorder? They are one of the countries greater in debt (here's some recent data), but they are also a rich country that can service their debt. The volatility will remain while Trump is there – people like him know no boundaries. I'd be selling my dollars.

By more order I just meant reducing the debt. Anyway my life is dollar based so I can't switch to another currency. My immediate decision is when I visit Japan in a couple weeks should I convert $0, $1000 or maybe $5000. Probably wouldn't be more than that given the uncertainty.

 

[Grandpa Frank]

When I left Japan , I bought back about $500US worth of Yen. I would put 500Y , 1000Y bills in birthday cards to my friends & family and they would feel rich , LOL. Years back there were anime festivals here a lot and I would pay for things in Yen and the young people went crazy for it. Bring back enough to decorate a Xmas tree for fun , LOL.

 

[salyavin]

The US government is currently trashing the state machinery and treating former friends like enemies, and the markets don't like it. Even with supposedly US-first policies, the dollar is about 2% weaker against the yen than it was a month ago (the pound and euro are both about 2% higher). As the US becomes a pariah, more countries will be making arrangements with other countries, as Canada is already rapidly doing, which will reduce demand for dollars. The West has been in long-term decline and, as one commentator recently put it, Trump has slammed his foot on the accelerator. I would be buying yen now rather than in a few years. Japan's slow decline due to depopulation and ageing is predictable; America's could be sudden and violent.

One thing Trump should know is part of the dollar value is getting others to do transactions in dollars, for example oil. Dedollarisation not Fort Knox is how you lower the value of the US dollar. He should be careful about undermining the confidence in the US.

 

[Majestic]

My preference would be to hold US$, all things considered. Too much uncertainty, most of it generated by the US itself. But in times of uncertainty, people dump risky assets and cling to the most stable one around.

OK - that was a month ago, and it looks like I overestimated the stability of the US economic situation. Seems the US isn't the stable partner/currency that it has been. Everything is on the decline...even gold is kind of sideways.

Rough waters, and no safe harbors for a while, gents. Except cash. In the currency of your own choosing.

 

[Grandpa Frank]

If the crap really hits the fan , I'm hoping guns and ammo become the new gold , LOL. I hope I don't live long enough to ever see a crash like in the 20's.

 

[Majestic]

Apparently the yen is a "safe haven" currency.
Never would I have imagined that traders would shift from the US$ into the yen due to the dollar being riskier than the yen.

 

[Lothor]

It's not particularly surprising. Markets don't like uncertainty, and Japan is a beacon of sanity compared with the US government. The gains in the yen also haven't been that great - about 3 percent against the UK pound, for example.

 

[Majestic]

Japan is a beacon of sanity compared with the US government

Well, there is nothing to disagree with in that statement. But personally, I'm surprised that the market sees holding the yen as a safer bet than holding the US$. Long term, the US$ would always seem to be a safer haven, given geopolitical uncertainly, and, maybe more importantly, Japan's demographic quicksand. And Japan's debt-to-GDP is another ticking time bomb.

So for investors or currency traders to take all of that into consideration and still think, "I'll take the yen over the dollar", is really astonishing. But maybe people are just making short-term bets based on the recent craziness. I don't know enough about currency trading. Well, I don't know anything about it. I would just think Japan's risks don't go away, even if America is having an unusual political freak-out right now.

 

[mdchachi]

Well, there is nothing to disagree with in that statement. But personally, I'm surprised that the market sees holding the yen as a safer bet than holding the US$. Long term, the US$ would always seem to be a safer haven, given geopolitical uncertainly, and, maybe more importantly, Japan's demographic quicksand. And Japan's debt-to-GDP is another ticking time bomb.

So for investors or currency traders to take all of that into consideration and still think, "I'll take the yen over the dollar", is really astonishing. But maybe people are just making short-term bets based on the recent craziness. I don't know enough about currency trading. Well, I don't know anything about it. I would just think Japan's risks don't go away, even if America is having an unusual political freak-out right now.

I wouldn't call it currency trading or investing so much as parking. If you have a billion dollars or so where should you put it if you want to put it in a safe place. The dollar is historically strong and is likely to weaken -- that's even a stated policy of the administration. And not only that, there's really no telling what's going to happen economically this year. In other words, the volatility of the U.S. situation could make it a riskier place to park money than Japan. At least for now. And who is pulling dollars out of the U.S.? China is the second largest foreign U.S. debt holder. It may make even more sense for them to move their holdings out of the U.S. given the fact that they seem to be permanently on Trump's naughty list because they refuse to lick his orange balls.

 

[salyavin]

Regarding China and their treasury holdings China's US$759bn Treasury holdings hang by a thread as tariff war escalates

 

[thomas]

Here we are again: the yen weakened past the psychologically significant threshold of 160 to the dollar on Thursday.

The yen weakened past the psychologically significant threshold of 160 to the dollar on Thursday and long-term Japanese government bond (JGB) yields surged to above 2.5%, as fears grew over the consequences of inflation fueled by the deepening energy crisis sparked by the prolonged war in the Middle East. In afternoon trading, the yen was down 0.7%, slipping into the upper 160 range. At one point, the yen touched its lowest point against the dollar in 21 months. The Japanese currency had fallen past the 160-mark during Wednesday trading in New York as investors sought so-called safe-haven assets like the greenback. The depreciation has raised speculation that Japan's financial authorities might intervene to prop up the yen.

Paywall alert:

Yen breaches 160 to dollar; JGB yield highest in nearly 3 decades

Hormuz blockade fuels higher oil prices and inflation fears, putting pressure on BOJ

asia.nikkei.com

 

[Lothor]

I think the intervention has just started. Here's the GBP vs JPY graph for the last day: the graph for USD vs JPY looks similar.

 

[Lothor]

And now down to 212.5 yen to the pound, almost a 2% drop from the peak earlier today.

Rinse and repeat in about another month when the yen weakens to 160 to the dollar again?

 

[Lothor]

My last post on this (I don't want to bore you!). It looks like the intervention has finished, but the pound has already recovered half its lost value. It may be that this policy is becoming ineffective, as the market quickly restores the yen to its value perceived by traders.

 

[thomas]

My last post on this (I don't want to bore you!). It looks like the intervention has finished, but the pound has already recovered half its lost value. It may be that this policy is becoming ineffective, as the market quickly restores the yen to its value perceived by traders.

Not boring at all! Please keep us posted.

The Japanese government and the Bank of Japan intervened in the foreign exchange market on Thursday by buying yen and selling dollars, a government official confirmed to Nikkei. The move pushed the currency to the 155 yen range against the dollar after it had softened to around 160 earlier that day, its weakest level in one year and nine months. Finance Minister Satsuki Katayama and other officials had issued verbal warnings against excessive yen depreciation earlier on Thursday evening, with Katayama telling reporters: "The time is drawing near to take decisive action" against the sharp decline in the Japanese currency. The last time authorities stepped in to strengthen the yen was in July 2024, when it hit 161.96, its weakest level in around 38 years. That intervention lasted two days and totalled 5.53 trillion yen ($35.2 billion at current exchange rates).

Paywall alert:

Japan launches FX intervention, briefly pushing yen to 155 from 160

Currency strengthens after government moves to curb yen weakness

asia.nikkei.com

 

[thomas]

Japan likely spent an additional 4 trillion yen ($25.6 billion) to shore up the yen in another suspected market intervention following a yen-buying operation on April 30, a market estimate based on Bank of Japan data showed Thursday. The latest estimate brings the total size of suspected operations in May and on April 30 to around 10 trillion yen. On Friday, Monday and Wednesday, volatile moves were observed on the foreign exchange market, with the yen briefly jumping 1 to 2 yen against the U.S. dollar into the 155 zone, fueling speculation that the government conducted further rounds of intervention after doing so on April 30.

Japan likely spent 4 tril. yen in suspected currency intervention in May

Japan likely spent an additional 4 trillion yen ($25.6 billion) to shore up the yen in another suspected market intervention following a yen-buying operation on April 30, a market estimate based on Bank of Japan data showed Thursday.

english.kyodonews.net

 

[thomas]

The Japanese government spent more than US$70 billion in taxpayer funds on yen intervention. Yet, the currency still blew through the ¥161-per-dollar mark overnight and approached levels not seen since the 1980s before pulling back just short of a multi-decade low. One comparison sees Japan's currency as the world's weakest, softer than Turkey's lira.


Japanese Finance Minister Satsuki Katayama is finding herself in an increasingly difficult position as pressure grows over the yen's continued weakness. Despite deploying more than 11.7 trillion yen (US$72.8 billion) in foreign-exchange reserves to support the currency between April and May, the yen has remained stuck around 160 per dollar. The situation has persisted even after the Bank of Japan raised its policy interest rate to the highest level in more than three decades.

The combination of large-scale currency intervention and higher interest rates was expected to provide support for the yen. Yet the Japanese currency continues to trade near levels that have repeatedly raised policymakers' concerns, leaving Katayama facing a challenge on the foreign-exchange front with few easy options.

Why Japan's $70 billion-plus intervention and a rate hike didn't prop up the yen more

Japan was willing to step in to defend the yen around the 160 level before, and it's at that point again.

www.cnbc.com

Yen nears four-decade low, and Katayama issues warning

The finance minister’s comments were not as strong as those made in April before intervention.

www.japantimes.co.jp

Paywall alert:

Yen's purchasing power sinks to new low as oil prices sap strength

One comparison sees Japan currency as world's weakest, softer than Turkey's lira

asia.nikkei.com

 

[thomas]

I hope they won't spend another few trillion yen of tax revenue to stem the tide for a few days...

The yen fell to a 39-year low against the greenback on Monday, as dollar buying driven by U.S. rate-hike expectations mounted pressure on the Japanese currency. The yen touched 161.98 per dollar at one point, the weakest since late 1986. This surpassed the currency's most recent low of 161.96, recorded in July 2024. Japan's currency has faced sustained pressure as investors favor the dollar amid expectations that the U.S. Federal Reserve could raise interest rates once or twice this year. Recent U.S. data on employment, consumer spending and business sentiment suggest resilient growth, while Middle East-related inflation concerns have reinforced views on tighter monetary policy.

Paywall alert:

Yen slips to 39-year low as dollar rally gathers steam

Investors price in Fed tightening while markets watch for Tokyo response

asia.nikkei.com

 

[thomas]

The Yen reached a new four-decade low, weakening to 162.83 against the dollar on Tuesday.

"Intervention can slow a fall, punish speculative excess and signal official discomfort. But it cannot repeal arithmetic," said Christy Tan, global investment strategist at Franklin Templeton Institute. "As long as investors can borrow cheaply in yen and earn more in dollars, the carry trade will keep carrying the yen away," Tan added, referring to the strategy where investors borrow in low-yielding currencies such as the yen to buy higher-yielding assets, which has weighed on the Japanese currency. That arithmetic has become increasingly difficult for Japan to fight. The BOJ's latest rate hike to 1% marked a meaningful step in Japan's long exit from ultra-loose policy, but borrowing costs remain far below those in the U.S.

Japan spent $74 billion propping up the yen. Investors say the real battle is with the Fed

Yen intervention alone is unlikely to reverse losses while wide U.S.-Japan rate differentials keep supporting the dollar, said analysts.

www.cnbc.com

 

[thomas]

It feels like Japan is turning into a third-world country.

​

 

[mdchachi]

The $10,000 probably included airfare. And it doesn't say how many people. But yeah the exchange rate is incredible.
If only there were Star Trek-like transporters available. I'd head to Japan every weekend. It's almost impossible to get a fast food lunch for less than $10 (Y1500) where I live and I'm not in a high-cost area.

 

[thomas]

And it doesn't say how many people. But yeah the exchange rate is incredible. If only there were Star Trek-like transporters available. I'd head to Japan every weekend. It's almost impossible to get a fast food lunch for less than $10 (Y1500) where I live and I'm not in a high-cost area.

Looks like a table of four. The article mentions an Australian family burning some 3m JPY for two weeks in Kyoto , Nara, Nagano and other places.

アメリカからやってきたというグループは、6日間の東京観光で160万円を使う予定だという。2週間かけて京都や奈良、長野などを巡ったというオーストラリア人家族の旅の費用は、300万円だった。

歴史的円安で「日本は安い」　1万3000円高級ビュッフェに訪日客「超お得」　街の弁当店は赤字ギリギリで価格維持に奮闘 - ライブドアニュース

円安が進む中、訪日外国人が日本の物価の安さに驚く声が相次いでいる。銀座の1万3000円ビュッフェが外国人に「超お得」と大好評とのこと。一方、江東区の弁当店は赤字ギリギリで価格を維持し奮闘を続けているという

news.livedoor.com

The Japanese comments in the X post are pretty pathetic and reflect deep resentment against those "rich inbound foreigners" who benefit from the weak yen while ordinary Japanese struggle. Others mention the insane wage gap between the US and Japan. How the tables have turned.

 

[mdchachi]

The Japanese comments in the X post are pretty pathetic and reflect deep resentment against those "rich inbound foreigners" who benefit from the weak yen while ordinary Japanese struggle. Others mention the insane wage gap between the US and Japan. How the tables have turned.

Clearly they weren't around during the Japanese bubble days. I do empathize with them. It doesn't seem like this exchange rate is sustainable.

 

[johnnyG]

Paul Krugman's substack on it: The Humbling of the Once Almighty Dollar

Note that he says: "I don't want to overstate the case here. The dollar's role as the dominant currency for ordinary business is not under threat. A new article in Foreign Policy by Agathe Demarais is titled "China's de-dollarization drive has hit a wall." It points out that overall use both of CIPS and of yuan remain quite modest compared with the SWIFT/dollar system. Doing business in dollars remains easier and cheaper than using any other currency, and will remain so unless U.S. policy becomes even more self-destructive."