Japan warns of intervention; BOJ conducts 'rate check' over yen's fall

Japan's problem is that it can't raise interest rates because Japan can't afford to service its own debt.

Japan's debt to GDP is by far the highest in the world, and grows higher every day with its new cash handouts to the poor, Covid relief, universal Covid treatment and vaccination coverage, the new "limit-less" defense budget, and idiotic non-producing costs like state funerals... and this is all on top of decades of budgets that were far from ever being balanced.

Increasing the interest rate means increasing its own debt payments, which at 0% are already too much to afford.

And despite the high hopes of tourists flooding Japan with money, the amount this represents just is a tiny fraction of the GDP. (in 2019, tourist added 4.8 trillion yen to the economy, the highest ever. This is less than 1% of Japan's 540 trillion yen GDP... and in 2019 a third of tourists were from China, who loved to spend). And don't forget, tourists are exempt from consumption tax of all the stuff the bring back home.

These people are just ridiculous. They are now going to buy yen to somehow prop it up. We just had a 9% CPI print in Japan and still they have stupidly easy monetary policy and rate curve controls.

Abenomics coming home to roost.

In the good old days Japan could issue warnings about 'currency intervention' if they felt it had gone one way or the other too much.

Nowadays,those same warnings have no relevance whatsoever.

They are totally ignored on the global stage.

How the mighty have fallen.

The Fed and the BOJ are scheduled to hold monetary policy meetings next week, with their contrasting policy stances expected to become even more evident.

So they can tell Japan what it already knows. US CPI is up. Food prices and rent up. The fed will continue to raise interest rates to combat it. The yen will continue to fall.

Japanese monetary tightening is shoving the whole Japanese economy between a rock and a hard place. You can only squeeze the lemon so much until there's nothing left. If this is some middle ground, then it's a terrible one. 145 is completely ludicrous already but here we are like it's normal.

By basically commiting to keep the rates at zero forever whatever happens in the rest of the world, Kuroda invites speculators to sell the JPY with little risk.

He has to show more ambiguity in his guidance to the markets so that speculators understand they take risks and will not always win by selling the JPY. But he has been a broken record for so long…

Dango bongToday  05:07 pm JST

I believe that is a euphemism for "currency manipulation."

Yes and no. In the United States when we accuse a country of "currency manipulation" we mean that a country is deliberately keeping their currency value low vis-a-vis the USD in order to maintain a trade advantage. Ie; more exports to the US and less imports from gthe US in USD terms.

In this case, Japan is stuck with a JYen that is too low. So it would be the opposite if the the BOJ intervenes to raise the value of the JYen against the USD.

I believe that is a euphemism for "currency manipulation."

Kaerimashita

Today 04:59 pm JST

These people are just ridiculous. They are now going to buy yen to somehow prop it up. We just had a 9% CPI print in Japan and still they have stupidly easy monetary policy and rate curve controls.

> Abenomics coming home to roost

And the rest are doing any better?

The USA stockmarket just dropped and more interest rate hikes on the way.

So In reality no one seems to know what to do.

Um, anytime guys. If you are going to act, then DO IT.

Intervening in the market by selling dollars or buying yen simply will not work.

The root cause of the low yen is the divergence between ultra low interest rate policy of the BOJ and the Fed’s policy to keep tightening until inflation is under control.

This is my prediction. The BOJ will waste a large amount of its foreign currency reserves in a futile effort to prop up the yen. In the end it will be forced to raise interest rates, but it will have to raise them even more because of their stubborn refusal to do so now.

Intervention will do little as the Fed keeps raising and the BOJ keeps rates unchanged. The downward pressure on the yen is only going to increase as the Fed continues to tighten and the rate divergence increases more and more.

Remember that the creation of central banks was number five of the 10 steps in the “Communist Manifesto” by Karl Marx.

Kaerimashita

Today 05:58 pm JST

Antique

> The rest are almost as bad, but Japan takes the cake for not even jawboning about controlling inflation

Unless things changed Japan 2.2% inflation, USA 8.5%, France 5.8%, Germany 8.8% UK 9.9%

So doing nothing is not so bad

The real problem is fiat currency.

It just sounds like the forth untold killing arrow legacy.

A. Exchange rates will always be variable.

B. People who pretend to know what's going on have no clue.

Currency manipulation is the word you are looking for... Japan has been called out for it multiple times and goes against open and free markets.

All talk, no walk. They won't intervene, market operations to alter value of currency (instead of raising interest rate) requires cooperation from other central banks AND traders. Want to know what happens when you do it on your own? Google Asian financial crisis, or BoE vs Soros.

it’s poll time!

Who thinks the Finance Minister and BOJ folks who have been printing money (willy nilly, if I may editorialize) for the last 9 years have the best interests of the entire populace of this country in the forefront of their considerations, as opposed to their own personal self interest (I mean, who wants to be the retiree age person who is in charge of dealing head on with a crisis, when you could just take the salary and shuffle on shortly)?

Vote down if you believe the former is true.

Vote up if the latter.

The intervention wont even touch the sides. DXY will continue to rip until US inflation is under control, which it aint. Thats the thing about being the worlds reserve currency. One thing Russia, India and China have got right is moving away from the petrodollar.

The real problem is fiat currency.

Correct

The central planners are utterly incompetent.

If they want the Currency’s decline to be arrested, put an end to the ongoing debauching of the currency by the BOJ and the government through 40+ trillion yen annual deficits and indirect financing of that by the BOJ.

Not continue to debauch the currency but throw away US dollars in the process for a temporary reprieve.

I seriously believe the sun of knowledge here in JT comments would conduct better economic policy than Japan’s current clueless administration

The fate of Japan is in the hands of narrow minded, mistake prone geriatrics which doesn’t bode well for the younger generations

Antique

The rest are almost as bad, but Japan takes the cake for not even jawboning about controlling inflation. Yes, the others are lying, but at least they have the market fooled for now.

Here they are so reluctant because to even talk about hiking rates will crush the governments budget......

Time for those fossils and dinosaurs oyajis in charge of Japan Finances to retire and be replaced with market driven younger generation who know how the market works in 2022.

Exactly! I can imagine the fossils tape reading in their chairs while grunting extremely loudly waiting for their tapes to catch up to 2022. Time to bring in fresh meat who can understand market trends by using a computer!

When the yen was strong, Japan bought huge amounts of US treasuries. As well as profiting handsomely on the exchange rate, with interest rates now soaring interest payments to Japan are going through the roof. A combination of taking advantage of soaring interest income, liquidation of a portion of those holdings to purchase extremely cheap yen, and a more proactive stance on nudging Japanese rates upward seems like the way forward. The sky may seem like it’s falling, but there are still plenty of arrows in the quiver.

@kaerimashita

We just had a 9% CPI print in Japan 

Huh? Japan’s core CPI was 2.6% for August.

@Davinda

Japan can't afford to service its own debt.

Really? Why not? Japan has been running the highest debt to gdp in the industrialized world for over a decade and always manages to “service its own debt.” Where’s the hyper inflation and sky high interest rates that would indicate such a fiscal crisis?  

@Simian

the government’s economists and banks will figure out the best way forward better than anyone in this comments section, thank god.

Indeed. So many of the comments on this thread are ridiculous and indicate a profound lack of understanding of monetary policy and other related issues. Yet the more incorrect they are, the higher the upvotes they receive. How depressing is that?

Create dept money to yourself and proclaim that is real world dept it's a scam.

Its not gonna work much longer.

Nobody is buying Japanese Bonds anymore.

@Kaerimashita INCORRECT just visited Japan tried to convert money from dollars to YEN. THINK again the fees to convert have been raised at the airport I was only able to convert only $2,400 US dollars and on top of that many people have to revert to using credit cards. The system is rigged against you. If you think you are going to buy or trade in your money for Japanese YEN its not gong to happen.

These people are just ridiculous. They are now going to buy yen to somehow prop it up. We just had a 9% CPI print in Japan and still they have stupidly easy monetary policy and rate curve controls.

Abenomics coming home to roost

The endless cycles of boom market to bubble market in the West make me worry. 

Better repeat bubble and bust over and over than perform it once and then stagnate for decades like Japan.

Also check out the China property bubble. It aint just the West my friend.

The global markets and speculators in general are going to bet big that they have more cash on hand than the Japanese Government does. They do. They're going to bet that Kuroda and the BOJ will be forced to break from near-ZIRP (zero interest rate policy), even if Kuroda's myopic "qualifications" for doing so haven't been fulfilled.

In the end, the markets will win. We'll soon see the charade of Japan's "fiscal uniqueness" come crashing down. And anyone here trying to tell you that maintaining a 266% debt to GDP is "just the way central banking works" should be totally ignored...

Hervé L'EisaSep. 14  10:28 pm JST

The real problem is fiat currency.

A six word sentence of truth.

If some genius would open the border, I’ll be happy to inject some cash flow back into Japan…still waiting for that to happen

Given that the 'rate' (¥ versus UD$) is falling and the current rate of the devaluation of the US$ in 'value' is falling even faster, the actual loss of 'value' to Japanese consumers must be even greater than these numbers suggest. No?

Indeed @JeffLee. Totally agree with you. No understanding of YCC - Just for starters. Yet you get the downvotes. Odd bunch.

the government’s economists and banks will figure out the best way forward better than anyone in this comments section, thank god.

Love the sarcasm :)

…. That was sarcasm right?

Those going on about Japan's debt.

Keep in mind a vast vast vast majority is owned to Japanese and not foreign entities.

Unlike most other western countries, the USA has a far far far higher portion of its debt owned by non USA entities.

So in a crunch Japan can pay off foreign entities and pass on paying domestic temporarily.

Few other countries have that luxury

@ Jeff Lee Well stated!!!

Indeed. So many of the comments on this thread are ridiculous and indicate a profound lack of understanding of monetary policy and other related issues. Yet the more incorrect they are, the higher the upvotes they receive. How depressing is that?

This year I sold my foreign assets and now have a modest amount in foreign currency which I am using to buy Japanese goods at low prices.

I am all for cheap yen…

Nobody should convert foreign currency in Japan; rates are uncompetitive and not in the seller’s favor.

Some countries give great rates on notes but credit cards are penalized.

In Japan foreign cash is drubbed!

The best way in Japan is to use a debit card at the post office for decent rates.

There is a 220 yen surcharge which is fairly modest.

It doesn't work. China and South Korea has been raising their rates for awhile now and China has even been buying their own currency heavily. The devaluation of their currency is still happening. It doesn't matter anymore if you raise interest rate or not. It is not working at all for the West too. The US is dragging everyone into the water and drowning. Nobody knows anymore how to stop the economy from crashing.

Raising interest raise will heavily effect our economy too. It will cause less people willing to borrow, which means less people willing to invest or start a business. Also means businesses will tighten up their savings and refuse to increase wages or try new things. This cause recession. Which the world is already heading toward too. It also greatly effect those with debts and make lives harder. Lower consumer spending and a sharp increase of unemployment is what you get. BOJ should not make the same choice as the US who is destroying itself.

I say instead of relying so heaavily into the dollar, the BOJ should instead do currency swap with it's neighbors. Especially with nations that we heavily import from. This will at least stabilize our economy a lot more than just relying on the dollar.

Sell the US treasuries or face a continuing inflationary nightmare.

Of course, Japanese elites don't dare to do so because many of them will end up assassinated or politically ruined by the zealous CIA/Pentagon. Last time, the US took pity on Japan after Abe's death, so a few US treasuries were allowed to be sold to stabilize the Yen.

Patience people; the tide will eventually turn. When it does, those invested in Japan and Korea, another export behemoth country whose currency, in defiance of all logic, has slumped against the $US, will be well placed to benefit handsomely when currently out of favor currencies surge. An insanely undervalued Yen and Won, relative to the idiotically overvalued US dollar, will see the return of huge capital inflows courtesy of tourists wanting more bang for the buck than they can get in their own ridiculously overpriced countries.