2024-01-02 05:20:36
The yen has been weakening against the dollar in the Sydney foreign exchange market on the 2nd due to the earthquake with a maximum seismic intensity of 7 that was centered in the Noto region of Ishikawa Prefecture. As the extent of the damage becomes clearer, some say it has become difficult for the Bank of Japan to lift its negative interest rate policy, which was expected to occur in the first half of this year.
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The yen’s exchange rate against the dollar temporarily fell to 141.67 yen to the dollar on the afternoon of the 2nd, Japan time. The yen has been at a weak level since the New York market (just around 141 yen) on December 29, 2023, before the holidays.
Daisuke Karakama, chief market economist at Mizuho Bank, said, “There must be a large number of overseas investors who have been anticipating the lifting of negative interest rates in January, but under these circumstances, it is almost certain that the Bank of Japan will not take any action at its monetary policy meeting in January.” “I’m deaf,” he says.
There were strong expectations that the yen would appreciate against the dollar in 2024. While there is a view that the U.S. Federal Reserve (Fed) will cut interest rates in the first half of this year, there is also speculation that the Bank of Japan will normalize its unprecedented easing, such as lifting negative interest rates, and the difference in interest rates between Japan and the U.S. will narrow. The perspective was the background. However, Karakama said, “If negative interest rates cannot be lifted in January, lifting them in the first half of 2020 is doubtful.”
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Karakama added, “Going forward, people will likely see the yen as a currency that normally responds to crises.” In March 2011, when the Great East Japan Earthquake occurred, the yen exchange rate, which had been hovering around 80 yen to the dollar, rose to the 76 yen level at one point. After that, the currency returned to the 85 yen level as monetary authorities in Japan, the United States, and Europe decided to intervene in the foreign exchange market by selling the yen, but the yen subsequently returned to a strong yen. In October of the same year, the price reached an all-time high of 75 yen.
At the time, the cause of the yen’s appreciation was the repatriation of Japanese companies’ assets held overseas, or repatriation. Karakama says, “The situation is different now than it was then.” At that time, trade surpluses had been accumulating for many years, and the flow of real demand supported the yen’s appreciation, but “Now, with a trade deficit of around 30 trillion yen over the past two years, it is difficult to expect the same reaction.” It’s impossible.”
Mr. Karakama added that, until now, people would buy the yen when a crisis occurred, such as a major earthquake or a missile being launched from North Korea, but “Basically, when a national crisis occurs, the currency depreciates.” “It’s becoming a normal situation.”
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