business

Aso warns against rapid rise in the yen

37 Comments
By Tetsushi Kajimoto

Japanese Finance Minister Taro Aso described the yen's recent rise as "rapid" on Friday, signalling concern that a strong currency could add pain to an export-led economy already in recession because of the novel coronavirus.

The yen's recent appreciation comes as the world's third-largest economy has been bottoming out from its deepest postwar slump, with authorities juggling a restart of economic activity with efforts to prevent a second wave of coronavirus infections.

The currency had been stable at around 107 yen to the dollar under Prime Minister Shinzo Abe administration, Aso told reporters after a cabinet meeting.

"Stability is important, so I'm closely monitoring it with a sense of urgency."

The dollar hit a 4-1/2-month low of 104.195 yen on Friday as investors worried that a recovery in the U.S. economy could be stymied by a second wave of coronavirus.

Japanese shares closed lower on Friday as the safe-haven yen strengthened on dismal U.S. data, while the resurgence of COVID-19 cases dampened hopes of a swift economic rebound, prompting authorities to discuss a response to market moves.

"The government and the Bank of Japan will keep a close watch on underlying market and economic trends and tackle as one as needed," Kenji Okamura, vice finance minister for international affairs, told reporters after a routine meeting with officials from the central bank and the Financial Services Agency.

A Japanese government panel acknowledged on Thursday that the economy peaked in October 2018 and fell into recession, suggesting it was struggling long before its more recent coronavirus slump.

"We have taken steps to support domestic demand rather than external, helping employment and household income improve, which led to a moderate economic recovery," Aso said.

Aso said exports accounted for less than 20% of Japan's economy, shrugging off any immediate impact from the yen's rise but the fact that he warned against the currency's gains underscored authorities' struggle to boost external demand.

Japanese authorities tend to fire warning shots against excessive currency volatility and disorderly moves at a time of market strains.

Tokyo has stayed out of the currency market since 2011 when it intervened heavily by selling the yen to prevent a strong currency from hurting an economy facing damage from a devastating earthquake, tsunami and nuclear disaster.

© Thomson Reuters 2020.

©2020 GPlusMedia Inc.

37 Comments
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A strong yen might not be good for Japanese companies that export, but for those of us in Japan who make yen, it’s not so bad actually. Especially when we return home.

6 ( +14 / -8 )

I can hear the money printers revving up. Hopefully the new cash comes in form of another handout to the people who will have to live with this inflation, instead of being put into ridiculous schemes like Abenomask, GoTo Travel, paying host/hostess bars to close, etc.

8 ( +9 / -1 )

"The government and the Bank of Japan will keep a close watch on underlying market and economic trends and tackle as one as needed," Kenji Okamura, vice finance minister for international affairs, told reporters after a routine meeting with officials from the central bank and the Financial Services Agency."

"close watch" means openly admitting market manipulation by the banks. The only watch happening is their own pockets.

8 ( +8 / -0 )

The dollar is weak because they're giving out free money to everyone and planning to do it again. Trump is killing the dollar. Governments forcing people to stay home and shutting down businesses will end up killing more people than the virus in the long run.

-15 ( +4 / -19 )

"warns" who?

4 ( +4 / -0 )

This is an extra kick to my business that is already on life support due to EMS cancelling all exporting to US for the last 4 months. Oh well at least I have my Abe money, oh wait, no that didn't arrive yet either.

13 ( +13 / -0 )

The Japanese economy is in recession but the US is in a darker place.

The dollar is weakening against the yen and the yen against gold.

Anyone not in possession of the hundred thousand yen should make an application before the 18th of this month otherwise the right to claim will disappear.

7 ( +9 / -2 )

"warns" who?

Snouts in the trough?

3 ( +3 / -0 )

""close watch" means openly admitting market manipulation by the banks. The only watch happening is their own pockets."

A central bank's brief is to control inflation, which hasn't been a big problem for Japan, and support their currency in foreign trade. This is the primary mission of any central bank anywhere in the world. If a nation's currency appreciates in value relative to the currencies of its trading partners, it exports become more expensive. When that happens the citizens of the countries Japan trades with start to substitute away from Japanese goods to less expensive goods from somewhere else, hurting Japan's businesses in the process. Central bankers are paid a salary from their government so they don't make any more money one way or the other.

3 ( +5 / -2 )

"This is an extra kick to my business that is already on life support due to EMS cancelling all exporting to US for the last 4 months. Oh well at least I have my Abe money, oh wait, no that didn't arrive yet either."

Do you sell on Buyee or Jauce? I like to buy stuff from Japan using those two e-commerce sites but with no EMS service I'm stuck using DHL and boy is that expensive!

5 ( +6 / -1 )

This is an extra kick to my business that is already on life support due to EMS cancelling all exporting to US for the last 4 months. Oh well at least I have my Abe money, oh wait, no that didn't arrive yet either.

That sucks, but I think that is a problem on the US side, not Japan’s. Japan Post has kept EMS and airmail service open to other countries, like Canada. I am pretty sure the USPS is the one jamming up the system.

9 ( +9 / -0 )

As Aso said, exports make up less than 20% of Japan’s GDP so the country’s economy is not export-led. The stronger yen means cheaper oil and natural gas imports, resulting in lower electricity and gas bills. So what are they making all the fuss about?

2 ( +4 / -2 )

The rising strength of the JYen against the USD is certainly not because of Japan, whose economy is such that the JYen should be depreciating. It's entirely on the USD side, the COVID19 situation, the economy and outlook. Unfortunately I fear the strong yen situation will continue (I can see JY100=USD1.00 on the far horizon already) until the US economy recovers, which would require a new Administration without a total idiot in the White House, and a handle of controlling COVID19. After November let's all MAGA.

And thank you Aso Taro, for your usual insightful statement. Are you thinking of doing anything? Something totally drastic like maybe devaluing the JYen??

3 ( +7 / -4 )

TokyoJoe & Desert Tortoise yes its painful with out the low cost service of EMS running and having to rely on DHL who have loaded in a fuel surcharge, a virus fee and various other dubious charges to scalp during this pandemic, they should be held to account, isn't it called gouging?

6 ( +6 / -0 )

Its money printin' time!

4 ( +4 / -0 )

but it's great if you are traveling to the US....Oh...Never mind'

2 ( +2 / -0 )

Aso said exports accounted for less than 20% of Japan's economy, shrugging off any immediate impact from the yen's rise but the fact that he warned against the currency's gains underscored authorities' struggle to boost external demand.

Domestic Demand in Japan

Give that domestic demand a few numbers....

https://www.focus-economics.com/country-indicator/japan/domestic-demand

There is no room for complacency

1 ( +1 / -0 )

Yen has become stronger against the US dollar by a very slim margin over the past few weeks. But at the same time the yen has lost strength against the Euro, AUD, NZD, CAD and many other currencies! As soon as the yen hit around 105 yen to 1 USD there seems to be so much panic which is baseless! I remember back in 2012 when 70 - 75 yen bought a US dollar and the economy of Japan was as strong as ever! The power of currency plays a role in the economy but not as strongly as these bureaucratic and financial goons want the local people to believe.

2 ( +3 / -1 )

"Especially when we return home"

And a lot are gonna return home....

0 ( +1 / -1 )

"That sucks, but I think that is a problem on the US side, not Japan’s. Japan Post has kept EMS and airmail service open to other countries, like Canada. I am pretty sure the USPS is the one jamming up the system."

It's not UPS. They don't deliver EMS packages in the US. The US Postal Service does. Japan Post ships EMS packages on commercial passenger flights. They load containers of packages for certain destination cities in the bellies of commercial airliners. That is generally how post offices around the world ship the mail, including packages. In the case of the US most flights are suspended until the US gets it's act together. As a result Japan Post doesn't have the flights on which to ship its EMS packages. UPS, FedEx, DHL and a few others fly dedicated cargo aircraft but you pay for that level of service.

3 ( +4 / -1 )

"A central bank's brief is to control inflation, which hasn't been a big problem for Japan, and support their currency in foreign trade. This is the primary mission of any central bank anywhere in the world. If a nation's currency appreciates in value relative to the currencies of its trading partners, it exports become more expensive. When that happens the citizens of the countries Japan trades with start to substitute away from Japanese goods to less expensive goods from somewhere else, hurting Japan's businesses in the process. Central bankers are paid a salary from their government so they don't make any more money one way or the other."

Readers please read carefully the above reply to an earlier post. Nothing could be further than the truth, simply that your in a dream that was at one time true, but not today. It is pure market manipulation and its always the consumers who end up paying the bulk and pensioners. No you can't give us that excuse anymore it just doesn't work especially when they openly and blatenlty spell it out for us, they are manipulating a one world currency to keep products no matter where you go into the hands of the super rich and they only get richer. That is the bottom line.

0 ( +3 / -3 )

It's not really the case of the Yen getting stronger. The US dollar is falling against many currencies, including China. For Japanese companies who compete with Chinese / Korean makers it won't really make a big difference. However, if Japan and other countries jump on the devaluation bandwagon, they will get that short-term competitive advantage. That's what I think Aso is watching closely.

3 ( +3 / -0 )

The MoF can complain all they want - it's beyond their control and down to the economic collapse of the US$ on the back of the coronavirus. Better to take advantage of a stronger yen with international commodities purchases than to complain about the hit exports are taking. Nobody is buying - anywhere.

0 ( +1 / -1 )

"As soon as the yen hit around 105 yen to 1 USD there seems to be so much panic which is baseless!" Wrong. This is a traditional point of support for the yen. If it falls through 105, the next point of support is 100, which the MoF really hates, (parity) and which does exporters no favors.

-1 ( +0 / -1 )

It's not UPS. They don't deliver EMS packages in the US. The US Postal Service does. Japan Post ships EMS packages on commercial passenger flights. 

I know, I didn’t say UPS, i said USPS (= United States Postal Service).

3 ( +3 / -0 )

Desert Tortoise thankyou for that detailed explanation. I suspected that was the reason, lack of flights. However EMS/Japan Post have provided no explanation at all even though I am a business account holder with them. As someone mentioned DHL prices are unworkable unfortunately.

1 ( +1 / -0 )

However EMS/Japan Post have provided no explanation at all even though I am a business account holder with them. 

A rep at my local JP office explained it to me when the package intake to the US was first halted.

1 ( +1 / -0 )

However, if Japan and other countries jump on the devaluation bandwagon, they will get that short-term competitive advantage. That's what I think Aso is watching closely.

it happened in 2008 and its happening now even more in 2020, American is effectively printing $Trillion to support its economy , aka quantitative easing, if America doesn't want others to do it then they shouldn't be doing it themselves, quantitative easing is not illegal and almost every major currency is currently doing it during this recession. What's good for the gander is good for the goose anything else is just plain hypocrisy

it’s not so bad actually. Especially when we return home.

how does taking your Japanese money out of Japan and spending it overseas help Japan!?

1 ( +1 / -0 )

A Strong Yen is what prevented the Japanese economy from a worse scenario: Hyperinflation.

-1 ( +1 / -2 )

The yen is cheap, making Tokyo cheap compared to many cities in the US now.

-1 ( +1 / -2 )

However EMS/Japan Post have provided no explanation at all even though I am a business account holder with them. As someone mentioned DHL prices are unworkable unfortunately.

Though Japan post was privitised it is still run and operated like a government entity, they are in no rush to look for alternative means to ship products like teaming with the private courier companies to use empty spaces on their cargo planes.

The only shipping option to the U.S, Australia and many other countries is by sea. Shipping to most of Europe by EMS just resumed lst month.

The prices of the private courier companies especially DHL and FEDEX are astronomical. Shipping from the .U.S to Japan by DHL is way cheaper compared to Japan ti the U.S.

2 ( +2 / -0 )

Monetary policy has gotten Japan no where in the last three decades. This isn’t Chile where you can send a team of Friedman economists and fix Japan. Not saying Fiscal policy is the answer either. Tax and spend is equally ineffective.

The Japanese are good at turning a blind eye and I look for Japan to rely on the Chinese economy while overlooking Tibet, Hong Kong and even the Senkaku’s to climb out of recession.

-1 ( +1 / -2 )

It’s more about the dollar weakening, and the yen being seen as more stable, I think. It is temporary, but good for those paid in yen with debt in dollars.

4 ( +4 / -0 )

It’s more about the dollar weakening, and the yen being seen as more stable, I think. It is temporary, but good for those paid in yen with debt in dollars.

its strange, because...

But at the same time the yen has lost strength against the Euro, AUD, NZD, CAD and many other currencies! 

is true. want to send some JPY to AUD but the rate is going the other way for AUD....even though I keep reading about the yen getting stronger everyday! :(

0 ( +0 / -0 )

DHL takes longer to deliver a parcel in locally in mainland Europe than it takes to arrive from Japan to Europe!

Unbelievable...!

0 ( +0 / -0 )

Yen's going up. Short US Dollar - Japan can't afford to do anything about it... quite literally.

0 ( +0 / -0 )

Currency is in general all about Supply and Demand.

So with the Japanese Government asking their National Companies to relocate back to Japan... you don't think that this would cause some extra purchase of Japanese Yen from another Currency ? (I really hope that this is the driving factor... that overseas operations are actually moving back here to Japan - a Country, which appears to be the most Stable within the region still...

0 ( +0 / -0 )

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