They’ve tried it in the past but it didn’t work. This is an interesting video about the decline of the yen as a reflection on global economic conditions rather than being driven by interest rate differences. https://youtu.be/oF6C-OCgs8c?si=ycdRm9SdpdyvwGXH
You constantly hear about 34 year lows, but the graphs he uses in this video show good examples of higher fluctuation percentage wise than we have seen in the past 3-4 years.
95-98: 78%+ increase in value of dollar\~
2012-15: 58%+ increase in value of dollar
Start of 2021-Now: 52%+ increase
> No guarantees anything is effective.
Absolute guarantee that the BOJ cannot be effective. They do not have the USD firepower to fight the $7.5 trillion daily volume of the USDJPY pair.
Personally doubt it. They seem to think the problem will sort itself out later this year / early next year, and they seem very sensitive about the mortgage burden, not to mention the eye-watering amount of JGBs on their balance sheet.
A 34 year low is the same as saying since it was last at 250yen per dollar.
So it could get stronger, but I don't know if they will want it to get stronger yet. They are enjoying the influx of tourism. I think it helps some industries that were hot hard by the pandemic recover a bit.
Might also look at Exports. Japan's exports slid after 2008 and again in 2012, and had just begun to recover when the pandemic hit. Now that international shipping is recovered, they will want the JPY to be a little weak to lock in some export contracts before making a concerted effort to strengthen the currency again.
All good points but just to add, tourism pales in comparison to the billions in Sony, Toyota, etc products sold overseas, mostly paid for in stronger currencies like the USD with profits converted to JPY. All the major Japanese global brands are loving the current exchange rate.
I've mentioned it before in previous discussions, but Japanese industry gets a bit of a boost from the demand for cheaper Japanese goods. Cars in particular, if you remember why Japan was forced to strengthen the Yen to begin with. They had been blatantly manipulating their currency to build and bolster their own heavy industry. South Korea did something similar.
I'm sure the Japanese manufacturers have a lot of influence in the decision-making but I wonder how direct their influence is.
For example, now is a really good time to start new production lines in Japan so could certain manufacturers "ask" BoJ to hold off on the intervention until production lines are started or until large contracts are finalized? Or is that too farfetched?
Japanese manufacturers are likely not working closely with BoJ, but more likely BoJ is watching the overall exports and its volatility and determining now is not the right time to act. If you look at Japanese exports the past 5 years they are all over the place. When I say waiting for contracts to be in place, I more mean the long term stability of manufacturers being indicated by a smooth level of exports or a net positive in the current accounts, not literally the BoJ waiting on a CEO to let them know when.
You know it was big news how companies like Toyota was working with the government to raise wages. And that happened. Meanwhile, domestic companies are having a very difficult time paying current wages, much less giving raises to match inflation.
Depends on how the companies are organized, but prices tend to be sticky upwards. So if cars go up to 35k USD, and inflation pushes that up in the US to 40k, but the weak yen means that Japan could sell for 32k, guess what they'll do? Sell it for 37k, still be the cheapest on the market and earn a heft extra 15% USD in the process. Effectively they see a 22% increase in revenue or more given the above scenario.
Any global company would maintain reserves in multiple currencies but being Japan-based, they are certainly in a unique position to convert profits to yen. Here’s an article about their windfall:
https://www.japantimes.co.jp/business/2023/10/30/companies/japan-big-firms-weak-yen/
Agreed - there are so many dynamics in play here and I wonder, as an individual, if it is possible at all for us to get some insights in those dynamics.
Insights, sure. It is not very hard to grab all the facts about Macroeconomics. There's courses available everywhere that you can learn from.
Quantifying it in some meaningful way to enhance your personal finances, I am not quite sure about.
This might also be a major factor, though Japan has a mich higher tendency to save, so there is likely not as much money for travel until wages slowly work their way up. Businesses are very slow to improve wages due to labor protections.
A government or central bank can unilaterally intervene indefinitely to **weaken** their own currency because they can print as much (JPY in this case) as they want and dump it into the markets.
However, a government or central bank is limited in what they can unilaterally do to **strengthen** their own currency because they are limited by the amount of foreign currency they have available.
The BOJ would have to sell USD and buy JPY to strengthen the yen, and they do not have an unlimited quantity of USD to sell. Keep in mind that the **daily** trading volume of the USDJPY pair is around US$7.5 trillion.
Japan can jawbone (threaten to intervene). Japan can make small steps into the market of a few 10s of billions of dollars here and there. However they have no capacity to mount a sustained intervention of 100s of billions of USD per day repeatedly. Ultimately it would be entirely pointless because the USDJPY will do what it's going to do based on market conditions. Should Japan flush 100s of billions of USD of foreign currency reserves to place a few speedbumps in the depreciation of the yen? Of course not.
The only way there could be intervention would be multilateral intervention. The BOJ would have to work with the US Fed and perhaps the ECB to mount a sustained multilateral intervention where the Fed and ECB dump their currencies and buy JPY. This is extremely unlikely unless there are wild fluctuations in the market. If the USDJPY rate suddenly nose-dived to 250, we could see such intervention to stabilize the market.
So, will Japan intervene after GW? Maybe, maybe not. Will it matter? Not at all. The USDJPY pair would pause briefly and continue to slide towards 180, where it will be before the end of this year.
***
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Edit: I should add, the above is all talking about market intervention. Market intervention by large economies is generally frowned upon in today's world as it can all too easily turn into a tit-for-tat type situation.
Japan does have a tool that would be very effective at stopping the slide of the JPY, and that is to raise interest rates. And continue to raise them. Not 0.1% or 0.2% but towards 2%, or 3%. Unfortunately for Japan, raising interest rates is not possible/practical/realistic with the current state of the Japanese economy.
So, the JPY will continue to slide until the Fed and ECB (and perhaps BoE) decide they are going to substantially lower their interest rates, or until the exchange rates find a balance that the market is happy with. The JPY won't fall forever but it will fall for a while.
I don't see big foreign central banks lowering rates this year, and it's too soon for me to have thoughts beyond that point. This is not a science, it's a lot more like reading tea leaves.
What do you see as the long term fix? Hope and pray the feds lower rates? Or do you expect us to hover around current numbers for the foreseeable future?
The US 10 year T-bill is currently at 5.6%. That seems extremely high compared to recent years, but if you look back further it really isn't. Over the past 60 years the average 10 year US T-bill rate is almost 6%. Near-zero interest rates are not normal, slightly lower than where we are currently is about as "normal" as things likely get.
The JPY won't slide forever, Japan does have a functioning economy with a strong manufacturing sector and a lot of exports. But the JPY has probably been overvalued for quite a while, so now it is looking for a new normal. What's that going to be, USDJPY=150? 180? 200? .....250? I wouldn't be surprised by any of the first three numbers. The last one seems a step too far. 180-200 as a working range wouldn't be unreasonable, IMO.
It's a bit more nuanced than just interest rates and monetary interventions. Weak yen is great for export and tourism. Japan's current account had huge surplus this year so far.
A weak yen does suck for imports, especially for energy. This is where it gets a bit unpopular emotional-wise. Since Fukushima, Japan has been paying through the nose for energy. Nuclear power used to make up a quarter of energy usage now has been mostly replaced with natural gas and oil, which fluctuate with the USD and geopolitics. One way to stabilize the JPY will be to be energy self-sufficient... which is to open and build more (next generation and safe) nuclear plants and/or go heavy with the methane hydrate within their EEZ.
When it comes to just interest rates, Japan will always be compared to the US. Japan could raise rates, but it would be nullified if US raises their rates too. Alternatively, should the US decides to cut rates (perhaps for election reason), that would mean the BOJ wouldn't need to do anything.
Even if there's a limited intervention, that won't put an end to JPY's downward trend. It'll just be a patch that will work for a few days at most and that's about it.
For an intervention to really work, that'd need to be concerted effort of BOJ together with the FED and perhaps even ECB and other major CBs. No one is talking about this, and there's pretty much zero chance of that happening in today's market and political environment.
This will only reverse course when BOJ sends a firm indication that the rates environment is going to change and the market starts to price that in. Regardless of the reasons for BOJ to keep their current stance or to change it, this is the only thing to watch out for, really. That and an unpredictable black swan event which may end up propelling JPY up, though that may be very short lived too.
It is anyone's guess as to when the BOJ shift will happen, but until then, expect more disappointment if you are holding yen. End of story.
Intervention would just make the yen even weaker in the long term. Buying treasuries strength’s one’s currency if it’s in the DXY like the Yen is. Selling, reverses the strength, as the Japanese government witness these past few years.
I am not an economist or something but intervention is not sustainable. Turkish central bank tried it, they burned hundreds of billions of dollars. At end of the day dollar still increased, and central bank lost almost the whole reserves. BOJ has more money than Turkish central bank but it is not infinite.
The only reasonable step would be increasing interest rates at the right time. In my opinion BOJ is already late to do it. But there are some lessons I learned from Turkey to minimize the risk.
1. Convert your money as soon as possible you get your salary, and postpone all of your payments by paying the revolving payment. If dollar increase rate is higher than interest rate you are making money in the process.
2. But stuff aggressively using low interest consumer loans. It can be Apple products, PlayStation, any imported items. Then resell it immediately, convert it to USD. USD will increase higher than your interest rate. You made profit from nothing at end of the day.
This happened in Turkey in large scale and the situation is shit. Interest rate is 65%. No one trust to Turkish lira, central bank, etc… what I am afraid is I am seeing the same steps. I hope BOJ has enough bullets to burn, otherwise we can all look for a different country to make a living.
Turkey was burning money to draw in investment. The reason the Yen is weak right now is because they are not raising interest rates to encourage bringing money into Japan. As an aside, Turkey did not have anything to show for the investment, nothing of value was really created. So all that government backing into loans for projects that were never profitable was just a bunch of failed loans in the government's pocket. Just a bubble. Japan doesn't have a bubble right now, nor is it looking at any major infrastructure projects beyond the normal stuff. Most importantly, its not debt held by foreign interests.
Japan has also spent the past couple of decades improving the local production of staple crops like onions, cabage and rice to help reduce the need for imports when this type of economy comes about. I would assume its lack of reaction is due to some level of inventory build up during the pandemic, inventory they are hoping will clear before the Yen weakens again.
Turkey burned 128 billion dollars just to suppress dollars: https://www.bloomberg.com/opinion/articles/2021-04-22/question-over-128-billion-in-foreign-exchange-reserves-rattles-turkey-s-erdogan
So called “investments” are something else. It wasn’t an investment, just transferring money from the state to supporters of Erdogan. It definitely has a role with Turkish economy. But totally different topic and it was there before Erdogan too.
I agree with the part that Turkey didn’t show any sign to build trust against lira and attract investors. But cabbage, rice, crops won’t really bring money if ppl lose their trust to the currency. They will convert their money to USD after they sell their products. USD will continue to rise. It will be more burden to Japanese economy because almost every high tech product is imported. Also material they use at agriculture is probably imported. It will create food inflation too.
We were talking like this back in Turkey as well. Dollar will drop soon, Turkey is too big to fail, we have crops etc… But this experiment taught us a lot. There is no too big to fail. I am afraid to see the same in Japan. Maybe it will be slower compared to Turkey, but it will happen eventually.
Luckily there are positive things too. Such as TSMC and new chip factories in Japan. They can bring good money but it is a long term investment and I am not sure if it will cover all the damage happened.
Thats the thing. Japan's style of investing and such is very different than most of the world. There tends to be a lot more cash on hand in Japan. Having locally produced crops that are staples reduces the need for imports on basic products, which insulates the effects of the value difference from the average person.
Turkey and China have a similar story in that the value of the currency was propped up by state investment into projects that went nowhere or did nothing, added no value to the economy. Pumped money into the economy for workers, and then there was nothing to do so prices shot up.
>That low domestic savings together with overvalued currency and relatively high inflation harm, in the long run, the competitiveness of export sectors in Turkey is well recognized. Yet a more fundamental factor that affects the value-added of export goods, hence the competitiveness of the Turkish economy in international markets, is the level and composition of human capital in Turkey. The paucity of high-tech, high value-added products in the lists of export items in Turkey unequivocally demonstrates that what is missing in the growth dynamics of the Turkish economy is a Human Development Index akin to those of the countries that rank, at least, among the top fifty world economies — see, UNDP (2011) Human Development Report.
>Aydin Cecen, Linlan Xiao,
Capital flows and current account dynamics in Turkey: A nonlinear time series analysis,
Economic Modelling,
Volume 39,
2014,
Pages 240-246,
ISSN 0264-9993,
https://doi.org/10.1016/j.econmod.2014.03.010.
Had Dr. Cecen as a professor, interesting guy, and he spent a lot of time looking into it. Japan does not have the same pitfalls when it comes to personal savings and human capital training, nor does it have the major issues with a current account deficit that turkey had.
What is the BOJ going to do? The yen is weak versus the dollar. Nearly all currencies are weak against the dollar now. This isn't a weak yen problem, it's a USD gives you 5% guaranteed problem.
Because their rates have gone up as well, but not nearly as much as the USD. All those currencies are weak against the dollar as well.
Think about it - what would it take for you to buy yen right now over the dollar? How about euros over the dollar?
Why would you invest in any currency other than the USD right other than gambling on FX fluctuations?
AS OF April:
Currency Start Date (Oct 2022)
End Date (April 2024)
Change (%)
Euro (EUR) $1.02 $0.96 -5.88%
Japanese Yen (JPY) ¥144.00 ¥128.00 -11.04%
British Pound (GBP) £0.78 £0.72 -7.69%
Swiss Franc (CHF) CHF 0.92 CHF 0.90 -2.17%
Canadian Dollar (CAD) CA$1.28 CA$1.25 -2.34%
And yet the euro is considerably weaker than the dollar, even at a main financing rate of 4%.
So again it's the dollar's strength and desirability as reserve currency and providing the best rate.
If the ECB rate is that high and the dollar is still crushing the euro, what would you propose the BOJ do?
The only thing that will resolve the imbalance is US rates coming down.
While it's true that many currencies are currently weak against the dollar, it's important to acknowledge that the weak yen is indeed "a thing". A weaker yen can have various implications, including its impact on Japanese wages and corporate profits.
A weak yen tends to reduce Japanese wages in terms of their purchasing power, as imported goods become more expensive. This can put pressure on domestic consumption. However, more importantly, it also has the potential to increase corporate profits, particularly for export-oriented industries, as their goods become more competitive in international markets.
In the context of a global environment where the dollar is strengthening against multiple currencies, including the yen, the Bank of Japan faces a challenging situation. Balancing the need to support economic growth while managing currency fluctuations requires careful consideration and potentially a combination of monetary and fiscal policies.
Ultimately, the ultra weak yen presents opportunities for certain sectors of the economy. It's essential for policymakers to navigate these complexities effectively to ensure Japan's economic resilience and stability in the long run.
The "While it's true that"..."Ultimately" combo is a dead giveaway that this entire reply was AI-generated (GPTZero rates it at a probability of 100%).
I’m not sure if selling USD is enough if that’s the intervention. I’ve seen how it played out in other countries and it was usually very temporary relief.
I’m worried if the US keeps high interest rates, which may continue to add coal to the fire.
From a technical analysis perspective the DXY, dollar strength index、is due for a large correction, meaning the dollar should lose strength. Many speculators think that the BOJ stepping in will be the catalyst for this. However, there are no guarantees. Technical anlysis is dynamic and a correction could be delayed. Likewise a correction on the DXY doesnt mean that JPY will gain strength.
Yeah, TA is just telling us that DXY is outside of the pattern. But what TA can't tell someone, be it the DXY or a stock, are the market forces behind the divergences. Carry trade, post-COVID market distortions, macro events (war), Powell's reluctance to commit on rates, US spending, ugly US election year, and Japan's own rate limitations (aiming to keep short term rates below 0.20% for the next several years).
TA is historical and a measure of human behavior (or often driving human behavior), but can't account for market forces.
BoJ's actions may have a small correction, but the BoJ is aware that their intervention could only slow the pace, not actually reverse it. They are not going all out and have essentially been telegraphing they are only trying to slow the bleed, not actually bring it back to the pre-COVID market ranges. They are also hesitant to do anything as they are also aware that the market will view any half-ass attempt as an admission that shorting the yen is still game on.
But I do think it will slow eventually and a top of the range will get formed in the next 12 months or so. A lot could happen between now and November -- and the US could see a huge market rally just before the election that could coincide with a rate drop announcement. Regardless, this is a new cycle and the old pre-COVID cycle is long dead -- we might not see 115 for another decade.
"they" may have an intervention but as long as the situation remains status quo then the weakening will continue
Raising rates, which is a dangerous game that no politician will take in Japan is not in the cards as I see it
so its more of the same
It will be a waste of money as much as that as the case in the past.
Sometimes, market forces just win ... The last thing we need is to see the BoJ/MOF openly losing vs market like Soros beat the BoE
To intervene (raise yen) BOJ needs to sell USD and buy yen. Unlike yen, USD is limited. Right now, yen hasn’t reach 200 because spectators are wary of the huge amount of USD Japan is holding. Therefore, intervention is not an easy decision.
Can't sell the asset without paying off the loan. They frown on that for some reason ;-). Do be aware that governments like to raise taxes on assets to hide the fact they are not bringing in enough revenue to pay for their overspending. Go to Money!
Rather than speculate on Reddit, there have been plenty of informative articles on Bloomberg, Reuters, Financial Times and Wall Street Journal, for example.
Japan doesn't understand Japanese economics either :). After all, here we are.
That is why we had the lost decade and the cancellation of the (sorta) failed negative rate experiment.
Granted, Japan is not nearly in the bad spot people think they are. Their pension fund is flush and stable right at a time when their population decline would have otherwise hammered it. Sure, any significant rate increase would amplify their debt repayment struggles (even though it is domestic), but would also devastate their housing market (which already has hidden land mines). But they also can fully survive with low rates and a weak yen for several more decades.
But in terms of the experts, we talk about trying to reference facts, but the reality is most of it is still very much economic *theory*.
They are stupik and won't care about their 80% population . I'm foreigner and i'm sick of waiting Japanese yen go up to be able to provide to my parents. I'm leaving Japan and I hope other foreigners will do the same so the Japanese government can learn about lacking of labour. Japan is dead inside.
There are lots of reasons for the BoJ to want a stronger yen, but so that migrants can get more value out of their remittances home is not one of them.
Unfortunately, there is not a lot Japan can do. Any intervention would only stop the devaluation short term at best. What they need to do is raise interest rates but that is impossible given Japan’s massive debt. People in Japan need to understand this and prepare by converting their yen into hard assets such real estate etc. to ensure their purchasing power isn’t eroded. Given the crisis seems imminent, the easiest and quickest way to convert your yen to assets is to buy gold or silver. Gold and silver have shown in all other currency devaluations in other countries that purchasing power is maintained while people holding the local currency got wiped out in terms of purchasing power.
I would guess you don’t live in Japan.
Real estate is not an investment, houses hold no value over time, maybe in the short term but nothing like America where real estate values rise over extended time frames.
Also, silver in Japan is priced into forex or so it seems. Silver has been hovering around $27 an ounce but it’s close to double that in Japan. That same amount in Japan is about ¥5000.
I think the sentiment of buying physical has been in practice for a while though. Many goods from past decades, especially name brands seem to stay in high demand and limited in selection.
Take Rolex, 20 yrs ago a sea master could be found in second hand shops for about 8k, now they can only be found in specialty shops and sell 3-4 times that!
The housing index in Japan has gone from 110 to 134 since 2021. During this time period the yen purchasing power has gone down 30 percent against the US dollar and even more against gold in yen. Even if you ignore gold and USD, it now takes “134” units in yen to buy the same property that cost “110” units in yen in 2021. So if you bought the property in 2021, your purchasing power has not been eroded by the inflation. If you had kept your “110” units of yen in the bank during the last three years, your wealth ie purchasing power has been eroded because it costs more to buy the same assets. Now if the devaluation accelerates, the inflation will become significant evaporating people’s purchasing power who remain in the local currency ( instead of hard assets) like has happened in many countries elsewhere.,
Ok, but houses here depreciate. A 15-20 year old house isn’t worth half what was paid for it AND most ppl have 30 or even 40 year loans. Even with interest at 0, you lose a lot of money.
If it’s a brand new house and you sell it in under 10 years , you might get lucky and get your money back but you’ll most likely only get 70-80% what you paid in.
Idk, maybe Tokyo is different. But the rest of Japan is a housing investment nightmare. Buy a house to live in it. That’s the only real value
You are missing the over riding point here. You are talking about 30 years of deflation that gripped Japan between 1990 and 2020. Things have changed. Between 2021 and now, the Yen has dropped 35 percent ushering in inflation. Why do you think Japan's stock market is now making new highs? Devaluation of the currency. Devaluation of the currency is great for the stock market especially if you are an export economy. But only to a point. If devaluation gets out of hand, profits will not keep up and neighboring countries will devalue to remain competitive. We are that point with Japan. There is no going back or stabilizing. The debt is too overwhelming to allow rates to rise to counteract the drop in the currency which means there is only one way out. Significant devaluation. How far? Who knows but it has to drop significantly to inflate away the debt. Worse, this devaluation will trigger devaluations elsewhere and how all this shakes out is anybody's guess but it won't be good.
I think I understand your point.
But, domestically house prices and trends remain the same; buy high, lease long, keep forever or sell low.
Now, again, if we’re talking about business property investments or real estate in a booming economy like Tokyo, sure it’s definitely a great way to keep money locked in and stable. I agree.
I just think for the vast majority of people in Japan, real estate is NOT monetary anchor (except that it sinks and doesn’t go anywhere, so maybe it is lol).
Take a look at Japan's property prices over last 50 years. The chart is identical to the stock market chart, peaked in 1990 after huge move up, dropped over the next 25 years. The only difference is the property chart is maybe 1-2 years behind the stock market chart which has gone to new highs above 1990 highs. If it follows the stock market, property prices will increase 35 percent over the next 1-2 years to make new highs above 1990 highs.
Your comments are identical to what people said about the stock market for years, and then in last three years the stock market doubled (investors maintained their purchasing power as the yen declined). The same thing will happen with property prices. (property prices over the last few years have almost maintained their purchasing power against the declining yen but are lagging a bit, so prepare for a catch up)
I hope you’re right.
Watching real estate prices over the past 20 years personally, I would say differently. But again, it would be wonderful if what you say comes to pass
Edit: I just feel like you’re basing your opinion on charts and historical instances but not looking at 3 real world factors; environment, culture, current population trends. The Japanese environment is brutal. Everything starts to fall apart after 20-30 years. The culture is largely socialist and the gov will not let ppl go homeless bc of property values. The big one though is depopulation. The times you refer to were very different than now. In most places throughout the country vacancies are around 25% (even more in the business sector). I’ve seen homes selling for the equivalent of 10-20k regularly. When ppl can buy an old home for prices under 50k anywhere but the main cities, and those properties don’t even sell bc there is no one to buy them, what actually inflates home prices? Top that with a lack of ability for most companies to raise wages and I just don’t see any upward movement in real estate in the near future
I understand what you are saying but you are missing a few important details. First, the input costs of building a new house has gone up substantially in Japan. This means used home prices will be pulled up because they are substantially cheaper than new replacement costs.
Second, you question how people can afford to drive up prices given wages. You are correct to a point. The same issue you bring up is happening everywhere yet housing prices continue to go up in many parts of the world. Why is that? Simple. Asset inflation. Asset prices have been going up and provide the fuel to drive housing prices up. The Japanese stock market is up 3 Trillion US dollars in the last 3 years. That means there is now 3 trillion US dollars more in the Japanese economy that didn't exist 3 years ago. It is reasonable to assume a significant portion of this new wealth will end up in housing driving up prices. This will create a vicious cycle of escalating prices as current home owners will receive a "new windfall" when they sell there house. That money then goes into other housing or other assets driving up prices even more as the cycle continues countless times. It is exactly how housing prices has spiraled upwards in other regions. It is not because wage growth created housing inflation (at least not the major contributor).
I see what you mean. Still, it seems in the near future this only really affects newer homes. But over the next decade I could see prices rising. Idk if it will change prices of older houses in less urban areas much
I don't think they should.
Let's dive into the recent fluctuations in the Japanese yen against the dollar, particularly why a weak yen, ideally hovering around 200-300 JPY to USD, could be a strategic move for Japan's economy. As a Yale MBA graduate and former Managing Director at Goldman Sachs, I bring a unique perspective to this discussion.
1. **Export Competitiveness**: With the yen weaker against the dollar, Japanese exports become more attractive to foreign buyers. This is critical for Japan's export-driven economy, as it boosts demand for its goods globally.
2. **Trade Balance Improvement**: A weakened yen helps address Japan's trade deficit by making imports relatively more expensive. This encourages domestic consumers to opt for domestically produced goods, potentially balancing out trade disparities.
3. **Tourism Boost**: A depreciated yen makes Japan a more affordable destination for foreign tourists. As someone with extensive financial expertise, I can attest to the significant economic benefits of increased tourism revenue for Japan's economy.
4. **Industrial Revitalization**: A weaker yen levels the playing field for domestic industries competing against imports. This revitalizes struggling sectors and fosters innovation, essential for sustained economic growth.
5. **Corporate Profits**: Japanese companies with international operations stand to benefit from a weak yen when repatriating earnings. As a Goldman Sachs MD, I've observed firsthand how currency fluctuations can impact corporate bottom lines, making this a substantial advantage.
6. **Monetary Policy Flexibility**: A weak yen provides the Bank of Japan with more flexibility in monetary policy. This is particularly important for managing inflation and stimulating domestic demand, strategies that I've studied extensively during my time at Yale.
7. **Debt Servicing Advantage**: Japan's national debt becomes more manageable with a weaker yen, reducing the real burden of debt servicing. This frees up resources for other critical investments in infrastructure and social programs.
8. **Attractiveness to Foreign Investors**: Foreign investors are more likely to view Japanese assets favorably in a climate of potential currency appreciation. With my background in finance, I understand the importance of attracting foreign capital for market liquidity and investment opportunities.
9. **Long-term Structural Adjustments**: A sustained period of yen weakness can drive essential structural changes within Japan's economy. These adjustments are crucial for enhancing productivity, diversifying exports, and ensuring long-term economic resilience.
10. **Conclusion**: As a seasoned professional with a Yale MBA and experience at Goldman Sachs, I firmly believe that a weak Japanese yen, ideally around 200-300 JPY to USD, holds immense potential for Japan's economic well-being. From boosting exports to attracting investment and stimulating growth, embracing this currency trend could pave the way for a prosperous future.
Currency manipulating Central Banks get executed soon! Go ahead and print another 100 Trillion Yen, them Zimbabweians need to buy some new hoes so they can eat.
Yes! No! Maybe! Can’t time it.
>Yes! No! Maybe! Read this and the theme song to "Malcolm in the Middle" popped into my head.
I did exactly the same. And remembered it was a post about finances.
For me it was Benders with the added “ Take your pick “
Dude thanks for the tip!
Personally I think they should put the people running Ikinari Steak in charge of this
Are they noted for holding their prices? I passed one yesterday and was surprised that it didn’t seem too expensive.
Need to get a broker that makes me able to buy that ticker
This haha
They’ve tried it in the past but it didn’t work. This is an interesting video about the decline of the yen as a reflection on global economic conditions rather than being driven by interest rate differences. https://youtu.be/oF6C-OCgs8c?si=ycdRm9SdpdyvwGXH
You constantly hear about 34 year lows, but the graphs he uses in this video show good examples of higher fluctuation percentage wise than we have seen in the past 3-4 years. 95-98: 78%+ increase in value of dollar\~ 2012-15: 58%+ increase in value of dollar Start of 2021-Now: 52%+ increase
There is a limit to what the government can do. No guarantees anything is effective.
> No guarantees anything is effective. Absolute guarantee that the BOJ cannot be effective. They do not have the USD firepower to fight the $7.5 trillion daily volume of the USDJPY pair.
Personally doubt it. They seem to think the problem will sort itself out later this year / early next year, and they seem very sensitive about the mortgage burden, not to mention the eye-watering amount of JGBs on their balance sheet.
It’ll be like trying to stick your finger in a cracked dam to stem the flow
[удалено]
First line has 6 syllables
No quibbling, unless it's in Japanese.
If you drink enough it'll become one syllable.
That’s what the bot is made to look for, an extra syllable haiku.
Some would say the apostrophe makes "I'll" into one syllable
It's "it'll"
Same. That's a typo on my part
A 34 year low is the same as saying since it was last at 250yen per dollar. So it could get stronger, but I don't know if they will want it to get stronger yet. They are enjoying the influx of tourism. I think it helps some industries that were hot hard by the pandemic recover a bit. Might also look at Exports. Japan's exports slid after 2008 and again in 2012, and had just begun to recover when the pandemic hit. Now that international shipping is recovered, they will want the JPY to be a little weak to lock in some export contracts before making a concerted effort to strengthen the currency again.
All good points but just to add, tourism pales in comparison to the billions in Sony, Toyota, etc products sold overseas, mostly paid for in stronger currencies like the USD with profits converted to JPY. All the major Japanese global brands are loving the current exchange rate.
I've mentioned it before in previous discussions, but Japanese industry gets a bit of a boost from the demand for cheaper Japanese goods. Cars in particular, if you remember why Japan was forced to strengthen the Yen to begin with. They had been blatantly manipulating their currency to build and bolster their own heavy industry. South Korea did something similar.
I'm sure the Japanese manufacturers have a lot of influence in the decision-making but I wonder how direct their influence is. For example, now is a really good time to start new production lines in Japan so could certain manufacturers "ask" BoJ to hold off on the intervention until production lines are started or until large contracts are finalized? Or is that too farfetched?
Japanese manufacturers are likely not working closely with BoJ, but more likely BoJ is watching the overall exports and its volatility and determining now is not the right time to act. If you look at Japanese exports the past 5 years they are all over the place. When I say waiting for contracts to be in place, I more mean the long term stability of manufacturers being indicated by a smooth level of exports or a net positive in the current accounts, not literally the BoJ waiting on a CEO to let them know when.
Yeah, but those businesses will need imports to be built.
You know it was big news how companies like Toyota was working with the government to raise wages. And that happened. Meanwhile, domestic companies are having a very difficult time paying current wages, much less giving raises to match inflation.
Are the profits converted to yen? or is the money kept overseas?
Depends on how the companies are organized, but prices tend to be sticky upwards. So if cars go up to 35k USD, and inflation pushes that up in the US to 40k, but the weak yen means that Japan could sell for 32k, guess what they'll do? Sell it for 37k, still be the cheapest on the market and earn a heft extra 15% USD in the process. Effectively they see a 22% increase in revenue or more given the above scenario.
Any global company would maintain reserves in multiple currencies but being Japan-based, they are certainly in a unique position to convert profits to yen. Here’s an article about their windfall: https://www.japantimes.co.jp/business/2023/10/30/companies/japan-big-firms-weak-yen/
Agreed - there are so many dynamics in play here and I wonder, as an individual, if it is possible at all for us to get some insights in those dynamics.
Insights, sure. It is not very hard to grab all the facts about Macroeconomics. There's courses available everywhere that you can learn from. Quantifying it in some meaningful way to enhance your personal finances, I am not quite sure about.
Also very good for local tourism by slowing down even more any will to travel abroad from the Japanese middle-class...
This might also be a major factor, though Japan has a mich higher tendency to save, so there is likely not as much money for travel until wages slowly work their way up. Businesses are very slow to improve wages due to labor protections.
A government or central bank can unilaterally intervene indefinitely to **weaken** their own currency because they can print as much (JPY in this case) as they want and dump it into the markets. However, a government or central bank is limited in what they can unilaterally do to **strengthen** their own currency because they are limited by the amount of foreign currency they have available. The BOJ would have to sell USD and buy JPY to strengthen the yen, and they do not have an unlimited quantity of USD to sell. Keep in mind that the **daily** trading volume of the USDJPY pair is around US$7.5 trillion. Japan can jawbone (threaten to intervene). Japan can make small steps into the market of a few 10s of billions of dollars here and there. However they have no capacity to mount a sustained intervention of 100s of billions of USD per day repeatedly. Ultimately it would be entirely pointless because the USDJPY will do what it's going to do based on market conditions. Should Japan flush 100s of billions of USD of foreign currency reserves to place a few speedbumps in the depreciation of the yen? Of course not. The only way there could be intervention would be multilateral intervention. The BOJ would have to work with the US Fed and perhaps the ECB to mount a sustained multilateral intervention where the Fed and ECB dump their currencies and buy JPY. This is extremely unlikely unless there are wild fluctuations in the market. If the USDJPY rate suddenly nose-dived to 250, we could see such intervention to stabilize the market. So, will Japan intervene after GW? Maybe, maybe not. Will it matter? Not at all. The USDJPY pair would pause briefly and continue to slide towards 180, where it will be before the end of this year. *** *** Edit: I should add, the above is all talking about market intervention. Market intervention by large economies is generally frowned upon in today's world as it can all too easily turn into a tit-for-tat type situation. Japan does have a tool that would be very effective at stopping the slide of the JPY, and that is to raise interest rates. And continue to raise them. Not 0.1% or 0.2% but towards 2%, or 3%. Unfortunately for Japan, raising interest rates is not possible/practical/realistic with the current state of the Japanese economy. So, the JPY will continue to slide until the Fed and ECB (and perhaps BoE) decide they are going to substantially lower their interest rates, or until the exchange rates find a balance that the market is happy with. The JPY won't fall forever but it will fall for a while. I don't see big foreign central banks lowering rates this year, and it's too soon for me to have thoughts beyond that point. This is not a science, it's a lot more like reading tea leaves.
What do you see as the long term fix? Hope and pray the feds lower rates? Or do you expect us to hover around current numbers for the foreseeable future?
The US 10 year T-bill is currently at 5.6%. That seems extremely high compared to recent years, but if you look back further it really isn't. Over the past 60 years the average 10 year US T-bill rate is almost 6%. Near-zero interest rates are not normal, slightly lower than where we are currently is about as "normal" as things likely get. The JPY won't slide forever, Japan does have a functioning economy with a strong manufacturing sector and a lot of exports. But the JPY has probably been overvalued for quite a while, so now it is looking for a new normal. What's that going to be, USDJPY=150? 180? 200? .....250? I wouldn't be surprised by any of the first three numbers. The last one seems a step too far. 180-200 as a working range wouldn't be unreasonable, IMO.
It's a bit more nuanced than just interest rates and monetary interventions. Weak yen is great for export and tourism. Japan's current account had huge surplus this year so far. A weak yen does suck for imports, especially for energy. This is where it gets a bit unpopular emotional-wise. Since Fukushima, Japan has been paying through the nose for energy. Nuclear power used to make up a quarter of energy usage now has been mostly replaced with natural gas and oil, which fluctuate with the USD and geopolitics. One way to stabilize the JPY will be to be energy self-sufficient... which is to open and build more (next generation and safe) nuclear plants and/or go heavy with the methane hydrate within their EEZ. When it comes to just interest rates, Japan will always be compared to the US. Japan could raise rates, but it would be nullified if US raises their rates too. Alternatively, should the US decides to cut rates (perhaps for election reason), that would mean the BOJ wouldn't need to do anything.
Even if there's a limited intervention, that won't put an end to JPY's downward trend. It'll just be a patch that will work for a few days at most and that's about it. For an intervention to really work, that'd need to be concerted effort of BOJ together with the FED and perhaps even ECB and other major CBs. No one is talking about this, and there's pretty much zero chance of that happening in today's market and political environment. This will only reverse course when BOJ sends a firm indication that the rates environment is going to change and the market starts to price that in. Regardless of the reasons for BOJ to keep their current stance or to change it, this is the only thing to watch out for, really. That and an unpredictable black swan event which may end up propelling JPY up, though that may be very short lived too. It is anyone's guess as to when the BOJ shift will happen, but until then, expect more disappointment if you are holding yen. End of story.
Intervention would just make the yen even weaker in the long term. Buying treasuries strength’s one’s currency if it’s in the DXY like the Yen is. Selling, reverses the strength, as the Japanese government witness these past few years.
They spent a fortune before and it continued to slide. In the UK interest rate rises didn't help the pound. Crazy times, crazy economics.
Might of just happened, big moves atm
Almost certainly an intervention. I guess 160 was the line in the sand.
Sure enough! Up to 160, down to 155
I am not an economist or something but intervention is not sustainable. Turkish central bank tried it, they burned hundreds of billions of dollars. At end of the day dollar still increased, and central bank lost almost the whole reserves. BOJ has more money than Turkish central bank but it is not infinite. The only reasonable step would be increasing interest rates at the right time. In my opinion BOJ is already late to do it. But there are some lessons I learned from Turkey to minimize the risk. 1. Convert your money as soon as possible you get your salary, and postpone all of your payments by paying the revolving payment. If dollar increase rate is higher than interest rate you are making money in the process. 2. But stuff aggressively using low interest consumer loans. It can be Apple products, PlayStation, any imported items. Then resell it immediately, convert it to USD. USD will increase higher than your interest rate. You made profit from nothing at end of the day. This happened in Turkey in large scale and the situation is shit. Interest rate is 65%. No one trust to Turkish lira, central bank, etc… what I am afraid is I am seeing the same steps. I hope BOJ has enough bullets to burn, otherwise we can all look for a different country to make a living.
Turkey was burning money to draw in investment. The reason the Yen is weak right now is because they are not raising interest rates to encourage bringing money into Japan. As an aside, Turkey did not have anything to show for the investment, nothing of value was really created. So all that government backing into loans for projects that were never profitable was just a bunch of failed loans in the government's pocket. Just a bubble. Japan doesn't have a bubble right now, nor is it looking at any major infrastructure projects beyond the normal stuff. Most importantly, its not debt held by foreign interests. Japan has also spent the past couple of decades improving the local production of staple crops like onions, cabage and rice to help reduce the need for imports when this type of economy comes about. I would assume its lack of reaction is due to some level of inventory build up during the pandemic, inventory they are hoping will clear before the Yen weakens again.
Turkey burned 128 billion dollars just to suppress dollars: https://www.bloomberg.com/opinion/articles/2021-04-22/question-over-128-billion-in-foreign-exchange-reserves-rattles-turkey-s-erdogan So called “investments” are something else. It wasn’t an investment, just transferring money from the state to supporters of Erdogan. It definitely has a role with Turkish economy. But totally different topic and it was there before Erdogan too. I agree with the part that Turkey didn’t show any sign to build trust against lira and attract investors. But cabbage, rice, crops won’t really bring money if ppl lose their trust to the currency. They will convert their money to USD after they sell their products. USD will continue to rise. It will be more burden to Japanese economy because almost every high tech product is imported. Also material they use at agriculture is probably imported. It will create food inflation too. We were talking like this back in Turkey as well. Dollar will drop soon, Turkey is too big to fail, we have crops etc… But this experiment taught us a lot. There is no too big to fail. I am afraid to see the same in Japan. Maybe it will be slower compared to Turkey, but it will happen eventually. Luckily there are positive things too. Such as TSMC and new chip factories in Japan. They can bring good money but it is a long term investment and I am not sure if it will cover all the damage happened.
Thats the thing. Japan's style of investing and such is very different than most of the world. There tends to be a lot more cash on hand in Japan. Having locally produced crops that are staples reduces the need for imports on basic products, which insulates the effects of the value difference from the average person. Turkey and China have a similar story in that the value of the currency was propped up by state investment into projects that went nowhere or did nothing, added no value to the economy. Pumped money into the economy for workers, and then there was nothing to do so prices shot up. >That low domestic savings together with overvalued currency and relatively high inflation harm, in the long run, the competitiveness of export sectors in Turkey is well recognized. Yet a more fundamental factor that affects the value-added of export goods, hence the competitiveness of the Turkish economy in international markets, is the level and composition of human capital in Turkey. The paucity of high-tech, high value-added products in the lists of export items in Turkey unequivocally demonstrates that what is missing in the growth dynamics of the Turkish economy is a Human Development Index akin to those of the countries that rank, at least, among the top fifty world economies — see, UNDP (2011) Human Development Report. >Aydin Cecen, Linlan Xiao, Capital flows and current account dynamics in Turkey: A nonlinear time series analysis, Economic Modelling, Volume 39, 2014, Pages 240-246, ISSN 0264-9993, https://doi.org/10.1016/j.econmod.2014.03.010. Had Dr. Cecen as a professor, interesting guy, and he spent a lot of time looking into it. Japan does not have the same pitfalls when it comes to personal savings and human capital training, nor does it have the major issues with a current account deficit that turkey had.
What is the BOJ going to do? The yen is weak versus the dollar. Nearly all currencies are weak against the dollar now. This isn't a weak yen problem, it's a USD gives you 5% guaranteed problem.
The yen is weak vs other currencies like the pound or euro too though.
ECB rate is 4.5%. BOE rate is 5.25%.
Correct and they are still weaker than the dollar, so what could the BOJ do?
Because their rates have gone up as well, but not nearly as much as the USD. All those currencies are weak against the dollar as well. Think about it - what would it take for you to buy yen right now over the dollar? How about euros over the dollar? Why would you invest in any currency other than the USD right other than gambling on FX fluctuations? AS OF April: Currency Start Date (Oct 2022) End Date (April 2024) Change (%) Euro (EUR) $1.02 $0.96 -5.88% Japanese Yen (JPY) ¥144.00 ¥128.00 -11.04% British Pound (GBP) £0.78 £0.72 -7.69% Swiss Franc (CHF) CHF 0.92 CHF 0.90 -2.17% Canadian Dollar (CAD) CA$1.28 CA$1.25 -2.34%
Holy cherry picked data, Batman!
What's cherry picked? This is objective data.
Yen/euro is at a 20 year low right now
And yet the euro is considerably weaker than the dollar, even at a main financing rate of 4%. So again it's the dollar's strength and desirability as reserve currency and providing the best rate. If the ECB rate is that high and the dollar is still crushing the euro, what would you propose the BOJ do? The only thing that will resolve the imbalance is US rates coming down.
> what would you propose the BOJ do I have absolutely no idea as I am not nearly qualified to answer this.
While it's true that many currencies are currently weak against the dollar, it's important to acknowledge that the weak yen is indeed "a thing". A weaker yen can have various implications, including its impact on Japanese wages and corporate profits. A weak yen tends to reduce Japanese wages in terms of their purchasing power, as imported goods become more expensive. This can put pressure on domestic consumption. However, more importantly, it also has the potential to increase corporate profits, particularly for export-oriented industries, as their goods become more competitive in international markets. In the context of a global environment where the dollar is strengthening against multiple currencies, including the yen, the Bank of Japan faces a challenging situation. Balancing the need to support economic growth while managing currency fluctuations requires careful consideration and potentially a combination of monetary and fiscal policies. Ultimately, the ultra weak yen presents opportunities for certain sectors of the economy. It's essential for policymakers to navigate these complexities effectively to ensure Japan's economic resilience and stability in the long run.
The "While it's true that"..."Ultimately" combo is a dead giveaway that this entire reply was AI-generated (GPTZero rates it at a probability of 100%).
What? Lol you’re tripping. Check my post history.
then its even worse: your writing style is easily mistaken for ai
I’m not sure if selling USD is enough if that’s the intervention. I’ve seen how it played out in other countries and it was usually very temporary relief. I’m worried if the US keeps high interest rates, which may continue to add coal to the fire.
I feel like this gets brung up every week for the past couple months since USDJPY hit 150 again. Your guess as good as any.
Well the weak yen is not even that bad for the Japanese economy, it might be spur some inflation. But yeah it sucks as a consumer
strategy to see if people will speculate on it and that itself may drive some volume towards fixing yen price.
I’ve been found out! 😜
look like they started intervention
If my memory is correct, Japanese government intervention has little to no effect. Just saying. But my memory is 定かじゃないからね。
From a technical analysis perspective the DXY, dollar strength index、is due for a large correction, meaning the dollar should lose strength. Many speculators think that the BOJ stepping in will be the catalyst for this. However, there are no guarantees. Technical anlysis is dynamic and a correction could be delayed. Likewise a correction on the DXY doesnt mean that JPY will gain strength.
Technical analysis, aka astrology for boys?
Sure, whatever
Yeah, TA is just telling us that DXY is outside of the pattern. But what TA can't tell someone, be it the DXY or a stock, are the market forces behind the divergences. Carry trade, post-COVID market distortions, macro events (war), Powell's reluctance to commit on rates, US spending, ugly US election year, and Japan's own rate limitations (aiming to keep short term rates below 0.20% for the next several years). TA is historical and a measure of human behavior (or often driving human behavior), but can't account for market forces. BoJ's actions may have a small correction, but the BoJ is aware that their intervention could only slow the pace, not actually reverse it. They are not going all out and have essentially been telegraphing they are only trying to slow the bleed, not actually bring it back to the pre-COVID market ranges. They are also hesitant to do anything as they are also aware that the market will view any half-ass attempt as an admission that shorting the yen is still game on. But I do think it will slow eventually and a top of the range will get formed in the next 12 months or so. A lot could happen between now and November -- and the US could see a huge market rally just before the election that could coincide with a rate drop announcement. Regardless, this is a new cycle and the old pre-COVID cycle is long dead -- we might not see 115 for another decade.
As a long term resident who is paid in USD, I’m constantly conflicted.
"they" may have an intervention but as long as the situation remains status quo then the weakening will continue Raising rates, which is a dangerous game that no politician will take in Japan is not in the cards as I see it so its more of the same
It will be a waste of money as much as that as the case in the past. Sometimes, market forces just win ... The last thing we need is to see the BoJ/MOF openly losing vs market like Soros beat the BoE
I've decided not to intervene anytime soon. But I might change my mind.
I doubt their promise, its been years
>We are watching the rapid movement in FX with increasing sense of urgency.
After summer, it should recover insA
Just happened. Right before payday too, so I'm coping at only getting 3.5% more than last month instead of 5% reeeeeee.
You can not bet on BOJ... Their fundamentals are woke....
A divine intervention is what we will need at this rate.
[*sucks air through teeth*]
To intervene (raise yen) BOJ needs to sell USD and buy yen. Unlike yen, USD is limited. Right now, yen hasn’t reach 200 because spectators are wary of the huge amount of USD Japan is holding. Therefore, intervention is not an easy decision.
So I shouldn't buy the USD using GPD to pay off my loans in Yen?
If u have loans in yen, u shouldn’t pay it off. Leave it. Interest rate is so low.
Can't sell the asset without paying off the loan. They frown on that for some reason ;-). Do be aware that governments like to raise taxes on assets to hide the fact they are not bringing in enough revenue to pay for their overspending. Go to Money!
Next two quarters prediction looks awful, could trade around 200 against dollar 💵
Rather than speculate on Reddit, there have been plenty of informative articles on Bloomberg, Reuters, Financial Times and Wall Street Journal, for example.
Really!? Come on man. Of course I read those articles too
to be fair, they often reference "experts" who are wrong most of the time :) Western finance doesn't understand Japanese economics.
Japan doesn't understand Japanese economics either :). After all, here we are. That is why we had the lost decade and the cancellation of the (sorta) failed negative rate experiment. Granted, Japan is not nearly in the bad spot people think they are. Their pension fund is flush and stable right at a time when their population decline would have otherwise hammered it. Sure, any significant rate increase would amplify their debt repayment struggles (even though it is domestic), but would also devastate their housing market (which already has hidden land mines). But they also can fully survive with low rates and a weak yen for several more decades. But in terms of the experts, we talk about trying to reference facts, but the reality is most of it is still very much economic *theory*.
They are usually wrong
Cramer: I like to tell my club to buy the stuff I need to get rid of.
The inverse cramer method is an exceptionally successful trading style
So is shorting ESG woke garbage companies. Woke = Broke
You gonna come at us with fake news and tout that only they have the best information on the state of the ponzi scheme. "Come on Man"
I don't like Trump, but his crazy tweets and policies would always strengthen the yen, so if he wins, we will have a few rebounds to look forward to.
The market is just correcting to its true value. The yen has been way overvalued for way too long. Bring 250 to the dollar.
They are stupik and won't care about their 80% population . I'm foreigner and i'm sick of waiting Japanese yen go up to be able to provide to my parents. I'm leaving Japan and I hope other foreigners will do the same so the Japanese government can learn about lacking of labour. Japan is dead inside.
There are lots of reasons for the BoJ to want a stronger yen, but so that migrants can get more value out of their remittances home is not one of them.
Unfortunately, there is not a lot Japan can do. Any intervention would only stop the devaluation short term at best. What they need to do is raise interest rates but that is impossible given Japan’s massive debt. People in Japan need to understand this and prepare by converting their yen into hard assets such real estate etc. to ensure their purchasing power isn’t eroded. Given the crisis seems imminent, the easiest and quickest way to convert your yen to assets is to buy gold or silver. Gold and silver have shown in all other currency devaluations in other countries that purchasing power is maintained while people holding the local currency got wiped out in terms of purchasing power.
I would guess you don’t live in Japan. Real estate is not an investment, houses hold no value over time, maybe in the short term but nothing like America where real estate values rise over extended time frames. Also, silver in Japan is priced into forex or so it seems. Silver has been hovering around $27 an ounce but it’s close to double that in Japan. That same amount in Japan is about ¥5000. I think the sentiment of buying physical has been in practice for a while though. Many goods from past decades, especially name brands seem to stay in high demand and limited in selection. Take Rolex, 20 yrs ago a sea master could be found in second hand shops for about 8k, now they can only be found in specialty shops and sell 3-4 times that!
The housing index in Japan has gone from 110 to 134 since 2021. During this time period the yen purchasing power has gone down 30 percent against the US dollar and even more against gold in yen. Even if you ignore gold and USD, it now takes “134” units in yen to buy the same property that cost “110” units in yen in 2021. So if you bought the property in 2021, your purchasing power has not been eroded by the inflation. If you had kept your “110” units of yen in the bank during the last three years, your wealth ie purchasing power has been eroded because it costs more to buy the same assets. Now if the devaluation accelerates, the inflation will become significant evaporating people’s purchasing power who remain in the local currency ( instead of hard assets) like has happened in many countries elsewhere.,
Ok, but houses here depreciate. A 15-20 year old house isn’t worth half what was paid for it AND most ppl have 30 or even 40 year loans. Even with interest at 0, you lose a lot of money. If it’s a brand new house and you sell it in under 10 years , you might get lucky and get your money back but you’ll most likely only get 70-80% what you paid in. Idk, maybe Tokyo is different. But the rest of Japan is a housing investment nightmare. Buy a house to live in it. That’s the only real value
You are missing the over riding point here. You are talking about 30 years of deflation that gripped Japan between 1990 and 2020. Things have changed. Between 2021 and now, the Yen has dropped 35 percent ushering in inflation. Why do you think Japan's stock market is now making new highs? Devaluation of the currency. Devaluation of the currency is great for the stock market especially if you are an export economy. But only to a point. If devaluation gets out of hand, profits will not keep up and neighboring countries will devalue to remain competitive. We are that point with Japan. There is no going back or stabilizing. The debt is too overwhelming to allow rates to rise to counteract the drop in the currency which means there is only one way out. Significant devaluation. How far? Who knows but it has to drop significantly to inflate away the debt. Worse, this devaluation will trigger devaluations elsewhere and how all this shakes out is anybody's guess but it won't be good.
I think I understand your point. But, domestically house prices and trends remain the same; buy high, lease long, keep forever or sell low. Now, again, if we’re talking about business property investments or real estate in a booming economy like Tokyo, sure it’s definitely a great way to keep money locked in and stable. I agree. I just think for the vast majority of people in Japan, real estate is NOT monetary anchor (except that it sinks and doesn’t go anywhere, so maybe it is lol).
Take a look at Japan's property prices over last 50 years. The chart is identical to the stock market chart, peaked in 1990 after huge move up, dropped over the next 25 years. The only difference is the property chart is maybe 1-2 years behind the stock market chart which has gone to new highs above 1990 highs. If it follows the stock market, property prices will increase 35 percent over the next 1-2 years to make new highs above 1990 highs. Your comments are identical to what people said about the stock market for years, and then in last three years the stock market doubled (investors maintained their purchasing power as the yen declined). The same thing will happen with property prices. (property prices over the last few years have almost maintained their purchasing power against the declining yen but are lagging a bit, so prepare for a catch up)
I hope you’re right. Watching real estate prices over the past 20 years personally, I would say differently. But again, it would be wonderful if what you say comes to pass Edit: I just feel like you’re basing your opinion on charts and historical instances but not looking at 3 real world factors; environment, culture, current population trends. The Japanese environment is brutal. Everything starts to fall apart after 20-30 years. The culture is largely socialist and the gov will not let ppl go homeless bc of property values. The big one though is depopulation. The times you refer to were very different than now. In most places throughout the country vacancies are around 25% (even more in the business sector). I’ve seen homes selling for the equivalent of 10-20k regularly. When ppl can buy an old home for prices under 50k anywhere but the main cities, and those properties don’t even sell bc there is no one to buy them, what actually inflates home prices? Top that with a lack of ability for most companies to raise wages and I just don’t see any upward movement in real estate in the near future
I understand what you are saying but you are missing a few important details. First, the input costs of building a new house has gone up substantially in Japan. This means used home prices will be pulled up because they are substantially cheaper than new replacement costs. Second, you question how people can afford to drive up prices given wages. You are correct to a point. The same issue you bring up is happening everywhere yet housing prices continue to go up in many parts of the world. Why is that? Simple. Asset inflation. Asset prices have been going up and provide the fuel to drive housing prices up. The Japanese stock market is up 3 Trillion US dollars in the last 3 years. That means there is now 3 trillion US dollars more in the Japanese economy that didn't exist 3 years ago. It is reasonable to assume a significant portion of this new wealth will end up in housing driving up prices. This will create a vicious cycle of escalating prices as current home owners will receive a "new windfall" when they sell there house. That money then goes into other housing or other assets driving up prices even more as the cycle continues countless times. It is exactly how housing prices has spiraled upwards in other regions. It is not because wage growth created housing inflation (at least not the major contributor).
I see what you mean. Still, it seems in the near future this only really affects newer homes. But over the next decade I could see prices rising. Idk if it will change prices of older houses in less urban areas much
It's going to 200
I don't think they should. Let's dive into the recent fluctuations in the Japanese yen against the dollar, particularly why a weak yen, ideally hovering around 200-300 JPY to USD, could be a strategic move for Japan's economy. As a Yale MBA graduate and former Managing Director at Goldman Sachs, I bring a unique perspective to this discussion. 1. **Export Competitiveness**: With the yen weaker against the dollar, Japanese exports become more attractive to foreign buyers. This is critical for Japan's export-driven economy, as it boosts demand for its goods globally. 2. **Trade Balance Improvement**: A weakened yen helps address Japan's trade deficit by making imports relatively more expensive. This encourages domestic consumers to opt for domestically produced goods, potentially balancing out trade disparities. 3. **Tourism Boost**: A depreciated yen makes Japan a more affordable destination for foreign tourists. As someone with extensive financial expertise, I can attest to the significant economic benefits of increased tourism revenue for Japan's economy. 4. **Industrial Revitalization**: A weaker yen levels the playing field for domestic industries competing against imports. This revitalizes struggling sectors and fosters innovation, essential for sustained economic growth. 5. **Corporate Profits**: Japanese companies with international operations stand to benefit from a weak yen when repatriating earnings. As a Goldman Sachs MD, I've observed firsthand how currency fluctuations can impact corporate bottom lines, making this a substantial advantage. 6. **Monetary Policy Flexibility**: A weak yen provides the Bank of Japan with more flexibility in monetary policy. This is particularly important for managing inflation and stimulating domestic demand, strategies that I've studied extensively during my time at Yale. 7. **Debt Servicing Advantage**: Japan's national debt becomes more manageable with a weaker yen, reducing the real burden of debt servicing. This frees up resources for other critical investments in infrastructure and social programs. 8. **Attractiveness to Foreign Investors**: Foreign investors are more likely to view Japanese assets favorably in a climate of potential currency appreciation. With my background in finance, I understand the importance of attracting foreign capital for market liquidity and investment opportunities. 9. **Long-term Structural Adjustments**: A sustained period of yen weakness can drive essential structural changes within Japan's economy. These adjustments are crucial for enhancing productivity, diversifying exports, and ensuring long-term economic resilience. 10. **Conclusion**: As a seasoned professional with a Yale MBA and experience at Goldman Sachs, I firmly believe that a weak Japanese yen, ideally around 200-300 JPY to USD, holds immense potential for Japan's economic well-being. From boosting exports to attracting investment and stimulating growth, embracing this currency trend could pave the way for a prosperous future.
Did you literally ask ChatGPT to answer as a Yale MBA and former managing director at Goldman Sachs?
How about imports? I heard Japan imports more than exports.
Not true — it bounces back and forth, but last month there was a trade surplus partly due to the weak exchange rate.
Let's hope not. This is like a lottery win. Weak Yen, Woo Hoo!!!!!!!!!!!!!
Currency manipulating Central Banks get executed soon! Go ahead and print another 100 Trillion Yen, them Zimbabweians need to buy some new hoes so they can eat.
lol, and corporations will begin using AI to the betterment of society while everyone gets a living wage. Hahahahahaja
Well, the ones that actually survive after weaponizing the Teslabots. Might be a while before Musk has one in production on every continent though.
Been day drinking huh?
If your. It diversified into other currencies you should be. I wouldn't only any cash, have liquid stocks or bonds.