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00:00Has Japan finally done it and intervened to protect the Japanese yen from further withdrawals?
00:08The most prominent file was with us at the beginning of 2024 due to the gap between the US and Japanese bonds
00:18and because of the enormous pressure that this created on the Japanese yen and because of our experience with the Japanese government
00:25there was an expectation from the beginning of this year that in the first half we would have an intervention from the government
00:32to prevent the Japanese yen from withdrawing from the US dollar.
00:36Today is an official holiday in Japan and therefore we have a weak liquidity.
00:40We have to remember that.
00:42But what happened in today's session and what prompted the negotiator to expect that there would be an intervention?
00:51We had reached levels for the dollar in front of the yen.
00:55We reached levels of 160 over the past period since the beginning of 2024
01:01and we are talking about the possibility of an intervention at level 145.
01:06We may have an intervention at level 150 and this intervention did not happen.
01:11Today, and specifically yesterday's session, we reached levels and exceeded 160
01:17so that this gap and these increases in the US dollar would turn into sharp withdrawals
01:26so that this pair would reach levels of 154.
01:30The market saw that there may be an intervention
01:33and the Japanese government may have intended to intervene in a public holiday
01:38or in a day that is an official holiday.
01:41Others say there may not be an intervention.
01:44It is only because of the great weakness of the liquidity because it is an official holiday
01:49and we have a kind of speculation that this is an excess of the increases that we have seen for the yen in front of the US dollar.
01:57When we talk about an intervention, this may not be the first intervention.
02:01It is after a series of interventions that we have seen over the past years
02:06since the Asian crisis.
02:09The most prominent was to a large extent in 2022 practically
02:14and especially because the intervention that we have seen in 2022 gave the traders an idea
02:20as if the Japanese government and the central bank are looking at the pair of dollars
02:26in front of the yen and are targeting certain levels.
02:29When we put a lot of pressure on the yen, they are ready to intervene.
02:34Usually, this intervention takes place through the process of selling the dollar
02:39and that is in the markets to protect the yen from withdrawals.
02:44Some financial sources reported in foreign newspapers
02:49that the banks intervened and carried out transactions to sell the US dollar.
02:56But these sources and these news are to a large extent uncertain.
03:00What should be focused on today in relation to these news
03:04is that the Japanese yen is a double-edged sword for Japan
03:09because it raises the cost of Japan's imports of energy and food
03:13and it has a negative impact on companies and families
03:15but at the same time it is a positive factor for Japanese exports
03:20and its competition with Chinese exports and also for the tourism sector.
03:24The other thing that we should focus on is that
03:27if this is not an official intervention from the government,
03:32there may be a time limit for this intervention in all cases.
03:35The reason for this is the American federalism.
03:38This is not even related to Japan.
03:40The American federal market expects the interest rate to be stable for a longer period
03:45and this means that we may not have the low rates that we were talking about at the beginning of the year
03:51and this means that the US dollar is stronger and the interest rates of US bonds are higher
03:56compared to the interest rates of Japanese bonds.
03:59All this environment creates greater pressure on the Japanese yen
04:04and therefore, if the Japanese central bank or the Japanese government did not intervene,
04:08we may indeed have new levels of interest rates compared to the US dollar
04:13because of this huge difference.
04:16On the other hand, we should remember that this difference will remain even with the intervention of the government
04:22to support the Japanese yen
04:24and this means that a large part of the Japanese investors' money that is outside Japan
04:31will remain outside Japan to benefit from the interest rates of foreign bonds
04:35whether in America or elsewhere
04:37because the monetary policy in Japan is actually an outlier
04:40or it is unique compared to the international monetary policies.
04:45After all, the Japanese central bank in its last meetings
04:48or before its last meetings, raised the interest rates to the required level
04:54which it took out of the negative level
04:56and in its last meeting, it confirmed that we may have more interest rates
05:02but the financial conditions in Japan will remain largely facilitated.
05:09In April, the return of the yen to the US dollar in terms of levels of interest
05:14also creates a problem for inflation
05:17because this will increase inflationary pressures.
05:20This is a positive and negative news
05:22especially since Japan has been suffering from deflation for many years
05:27but for the Japanese central bank, it sees that the basic inflation will reach 2.8% in the financial year that started in April.
05:37The equation is very difficult
05:39because we are not only talking about the Japanese economy or the Japanese monetary policy
05:44but we have to take into account what is happening in America
05:48and the impact of what is happening in America on the Japanese assets and specifically on the yen.