bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

urlAlias

moreOnThisArticles

sponsorType

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

Reuters

Japan’s yen hit a three-decade low on Monday before rebounding in a move currency traders suspected was official intervention.
Support for the currency follows a years-long slide that even Japan’s first interest rate hike since 2007 and broad optimism about the economy has failed to arrest.
In real terms, the yen has been at its weakest since at least the 1970s. It traded at 160.245 per US dollar on April 29 before rising to 155.01 per over a few hours, seemingly without any news or information in the market.
A weaker yen is a boon for Japanese exporters’ profits, and for tourists visiting Japan who find their currencies going further, but it squeezes households by increasing import costs.
Land of the falling yen may tempt bargain-hunting Hongkongers to spend in Japan
Here are some of the reasons for the slide:
Rates
Interest rates and momentum are powerful forces in foreign exchange markets. Both are against the yen. The Bank of Japan left short-term Japanese interest rates between 0 and 0.1 per cent in April and did not indicate sharp or sustained rises were coming up ahead.
That left the yen the lowest-rate, or yielding, G10 currency and investors are borrowing it cheaply and selling it to buy higher-yielding currencies, driving its price down.
These deals, known as a “carry trades” are particularly attractive when broader market volatility is relatively low, as it is right now, as the fundamental rate difference can drive the markets.
Short-term US rates are at 5.25-5.5 per cent, and a US rate cut isn’t expected until November or December.
The US-Japan government bond yield gap at the 10-year tenor is about 375 basis points.


Momentum
Why is the yen falling? Because people are selling it. And why are people selling? Because it is falling. Such can be the self-fulfilling loop of the market mindset.
The yen has been steadily sliding for more than three years and has lost more than one-third of its value since the start of 2021 and few are game to stand in the way.
The trend discourages exporters from converting foreign proceeds into yen. It encourages Japanese financial institutions to invest abroad. And it has been a boon for speculators betting against the yen, who have not been shy.
Speculators’ short-yen positions hit their largest since 2007 in the week ended April 23.
Japan sees record 3 million foreigners in March, as tourists cash in on low yen
Outlook
Japan’s central bank made a historic shift out of negative interest rates in March. But the move was so well advertised, and has not put future sharp hikes on the table, leaving investors comfortable to add to short yen positions.
The BOJ’s decision to leave policy unchanged at its April meeting and to offer no fresh hints of hikes seemed to unleash a new wave of yen selling that drove the currency, briefly, weaker than 160 per dollar for the first time since 1990.
The rates picture is also keeping big Japanese investors’ cash abroad, where it can earn better returns.
Japan Post Bank and Japan Post Insurance, among the largest financial firms, told Reuters their portfolios won’t be radically changing in response to the BOJ’s March shift.


Response
The yen rose sharply over a few hours in the Asia daytime on April 29, leading traders to suspect that after weeks of threatening to intervene, Japan had stepped in to support its currency.
Japan’s top currency diplomat Masato Kanda declined to comment when asked if authorities in Tokyo had intervened. In any case, the risk of intervention at these levels is high enough that few wanted to stand in the way of the yen’s rebound.
Real terms
A real effective exchange rate index value of 70.25 for the yen in February is the lowest since the Bank of International Settlements’ records began in 1994 and lower than any of the Bank of Japan’s retrospective projections, which date to 1970.
That means tourist dollars go further than they have for generations, and that has the tourism industry booming. Japan’s current account has been in surplus for 13 months with help from tourism income, and February’s 2.79 million visitors was a record for the month.
Why are Japanese brands taking young Indians by storm?
Domestic consumption, however, has been a weak spot in Japan’s fragile economic recovery as households tend to be net importers and face higher prices due to a weak yen.
Beyond Japan, some analysts say the yen’s weakness threatens to erode the competitive advantage of Chinese manufactures, and speculate it could be behind recent falls in the yuan – though authorities in China maintain a close grip on the currency.


Japan’s Takaichi tipped for snap election gamble as poll ratings soar

For South Korea to reset relations with China, it must withstand US pressure

Japan zoo makes workers mimic pandas after returning all 4 to China, launches club for fans

As Beijing targets Tokyo over Takaichi’s Taiwan remarks, what levers does Japan have?

Japan

Why has the Japanese yen dipped to a three-decade low? There are several factors

A passerby looks at a screen showing the exchange rate between the US dollar and the Japanese yen in Tokyo on Monday. The Japanese yen marked a sharp decline to the 160 yen level per US dollar, its lowest since April 1990. Photo: EPA-EFE

Falling yen is great for 2 sectors in Japan

Visitors look out from Shibuya Sky, the observation deck atop Shibuya Scramble Square, in Tokyo, in June 2021. The falling yen has also added to the appeal of Japanese commercial property. Photo: Reuters

Tourists visit Kotokuin Temple to view and pray to the 13.35m tall Great Buddha of Kamakura, in Kamakura, south of Tokyo, on April 21. The number of foreign visitors to Japan in March hit over 3 million, a record for a single month. Photo: EPA-EFE

As yen sinks, Japan must avoid goading China into a currency war

A man walks past an electronic board showing share prices on the Tokyo Stock Exchange and the rate of the Japanese yen versus the US dollar, on a street in Tokyo on March 19. Photo: AFP

Japan welcomed record 3 million tourists in March, as yen’s three-decade low lures travellers from US, India, Germany

Visitors walk along the Sannenzaka approach in Kyoto, Japan, on Saturday. For the first time ever, Japan welcomed 3 million tourists in a month. Photo: Bloomberg

Visitors take selfies photographs at Kinkaku-ji Golden Temple in Kyoto, Japan, on Saturday. Photo: Bloomberg

AI, yen are among hotspots to watch in Asia this earnings season

Pedestrians walk past a display showing the yen-US dollar exchange rate in Tokyo. The yen declined below the 153 level for the first time in 34 years on Monday. Photo: EPA-EFE

Samsung Electronics reported a sharp rebound in profit on higher memory prices and robust smartphones sales Photo: dpa-Zentralbild

Pedestrians walk past a display showing the Nikkei stock average and the yen’s exchange rate against the US dollar, in Tokyo, on Tuesday. Photo: EPA-EFE

The performance of China’s stock markets has been woefully inadequate over the past few years. Photo: EPA-EFE

Japan’s Softbank Group is expected to remain profitbale after swinging to a profit in the last quarter of 2023. Photo: AP Photo

India’s Prime Minister Narendra Modi addresses an election campaign rally in Balurghat in the eastern state of West Bengal, on Tuesday. Photo: Reuters

News

Asia

East Asia

The yen has been steadily sliding for more than three years and has lost more than one-third of its value since the start of 2021
A weaker yen is a boon for Japanese exporters’ profits, and travellers to Japan whose currencies go further, but squeezes households by increasing import costs


The yen has been steadily sliding for more than three years and has lost more than one-third of its value since the start of 2021.


Currencies

Foreign exchange market

Central banks

Tourism

Asia travel

Provide background, definition and detail of a specific topic, helping the reader understand how something works or what has happened in the past.  (Eg. What is Nafta? US and Mexico are on the verge of revising trade deal.)


Explainer