Yen surges as global market rout continues

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  • 9

    Sensato

    This has been a catastrophic week for the Nikkei, and it is only Wednesday.

    The Nikkei 225 is now lower than the DJIA for the first time in quite a while, and the USD JPY has strengthened to the 114 range.

    The BOJ's negative interest rate didn't keep the yen weak for very long at all. The impact of monetary policy seems to be fading fast.

  • 14

    Da_Realist

    There is no easy fix, Japan.

    Brace yourself for the long haul, bite the bullets and finally institute the deep structural overhaul that has been needed for decades.

    All this manipulation is just making things worse. Blind fools.

  • -5

    mr_jgb

    BOJ & MOF should decisively take advantage of the very strong Yen, and sell lots of Yen and buy US$. Get the US$ and purchase US stocks & bonds & oil, foreign assets. In this way 3 benefits are obtained: 1. Yen will weaken, helping the economy & markets. 2. Increased in foreign reserves. (Just print more Yen if market players still want the Yen to appreciate). 3. Increased in higher yielding foreign investments and assets.

  • 1

    Aly Rustom

    Hats off to both of you. You are both spot on.

  • 6

    Da_Realist

    @mr_jgb

    The Yen is actually relatively weak compared to other reserve currencies...artificially so.

    Japan already has massive foreign currency reserves. Second only to China.

    Negative interest rate is having the opposite affect BOJ though it would. Investors are using the yen as a safe haven to shield themselves from the volatile market, causing the Yen to strengthen rather than weaken.

    Bottom Line = Japan's economic advisors have been looking for the quick, easy fix for years. It's not working. What's needed is a transition from a bank centered economy to a market centered economy that STOPS rewarding losers and propping up failed companies.

  • 1

    Frederic Bastiat

    The bottom line is that the centrally planned currency manipulations are coming to a head and causing the implosions.

  • 2

    Da_Realist

    Yea, that's more or less what I said.

  • 4

    fxgai

    Monetary policy? Ultra loose. Fiscal policy? Ultra loose. Regulatory policy? Too tight!

    Governments and electorates that get this and take measures will see their economies pick up.

  • 1

    jazz350

    All the gamblers are losing!

  • 5

    Gary Raynor

    Da_Realist

    @mr_jgb....

    It's also a very stupid idea in the year of a US Presidential election and the TPP. Such action would be blatant currency manipulation, something all G7 countries have promised not to do.

    Such action would quickly be followed by US and European emergency tariffs on Japanese imports and we would soon be back to the 1930s.

    Japan's problems are not economic and they need not be demographic, Japan runs a current account surplus and has , apart from 2 quarters, since 1974. Anyone who doesn't think that the quality of life in Japan might not a little more developed with 40,000,000 less Japanese is living in a Hiroo / Roppongi bubble.

    Japan's problems are fiscal. Quite simply the Japanese government spends/wastes too much money.

  • 6

    kurisupisu

    The same goes the banks! Doing fx in a bank here still involves taking out the passport and having the cash checked again and again! Multiple staff repeating the same job or doing nothing more than shuffle papers around All extremely wasteful situation.......

  • 0

    Da_Realist

    Japan's problems are fiscal. Quite simply the Japanese government spends/wastes too much money.

    In other words....the problem is an over-reliance on Keynesian economics run amok? Agreed. Hence, a policy recommendation that shifts towards a market-centered economy and away from government manipulation and over regulation.

    But, let's not full ourselves into thinking this problem that resides solely in Japan.

    Such action would quickly be followed by US and European emergency tariffs on Japanese imports and we would soon be back to the 1930s.

    I think this is a bit dramatic. Different world, different circumstances. Neither the U.S. or E.U. has any interest in watching Japan collapse. They'll work to prevent such an occurrence rather than foment it. Just my opinion, though.

  • 0

    Kobe White Bar Owner

    @Mr

    What are you talking about buy dollars??????

  • 2

    shonanbb

    How can anyone think that the Japanese Yen should be stronger?

    Look at the economy. Negative growth, negative interest rates. Buying the dollar should be the way to go.

  • 0

    Gary Raynor

    shonanbbFeb. 10, 2016 - 04:01PM JST

    How can anyone think that the Japanese Yen should be stronger?

    Anyone with a bit of economic knowledge.

    Japan runs the 9th biggest current account surplus in the world, $56,660,000,768. Most of those above it, apart from Germany, South Korea and China, are oil exporting countries.

    Again, Japan's problem is not the money it makes through world trade and investment, but the money that the Japanese government keeps spending. Those shinkansens, bridges to nowhere, nice buildings in Hanzomon don't come free.

  • 4

    sangetsu03

    How can anyone think that the Japanese Yen should be stronger?

    What are the alternatives? The Euro? Some Eurozone members are also in negative rates, and the ECB is also printing money. The dollar? The US has one-third of it's population on welfare; the number of people on food stamps has tripled since Obama took office, and the US has been through three cycles of QE. China? Yeah right. The yen isn't getting strong because of any inherent strength in the Japanese the Japanese economy or the safety of the currency, it is only because of lack of options. The market can count on the BOJ and Abe continuing to pump up Japan Inc at the cost of the Japanese people.

    What we are looking at now are the consequences of vote-buying (via entitlements, and taxing the job-creating parts of the economy to pay for them) and economic mismanagement among developed countries, which seem to be devolving into using economic practices that were before only seen in third-world countries.

  • 0

    kawabegawa198

    Awesome! More money to send home to the UK!

  • 1

    debidosan

    @sangetsu03

    ??? In the U.S. the economy has now gained nearly five times more jobs under President Barack Obama than it did during the presidency of George W. Bush, and the unemployment rate has dropped to just below the historical average. Real weekly earnings are up 1.7 percent, thanks in part to a plunge in gasoline prices. Corporate profits have nearly tripled, and stock prices have soared. On the other hand, the number of Americans receiving food stamps remains 45 percent higher than when the president first took office, and the rate of home ownership has dropped by 3.2 percentage points, to the lowest point in nearly 20 years.

    I agree the yen should strengthen but not because of the reasons you suggested.

  • 2

    Da_Realist

    In the U.S. the economy has now gained nearly five times more jobs under President Barack Obama than it did during the presidency of George W. Bush, and the unemployment rate has dropped to just below the historical average

    ....because those on government bennies don't count as "looking for work" or "unemployed." In other words, with some 93 million Americans "out of the work force", the unemployment figures are skewed. Everyone knows this. Don't get hooked on Obama's government cheese.

  • 0

    FizzBit

    Corporate profits have nearly tripled, and stock prices have soared.

    Did you pull those stats off of the White House web site or are they the WH's daily news briefing talking points?

    You do realize that anyone with a money printing machine would look just as good. My friends tried copying money at their dads printing business, I think they served 10 days because they were still minors.

    And wages have not seen any significant increase since the mid seventies. Go peddle that crap on Yahoo news please.

  • -2

    JeffLee

    "How can anyone think that the Japanese Yen should be stronger?"

    Well, no one on this forum (except me and Guy) ever predicted this, eh? Everyone here (except us) was saying a year ago with great certainly the yen's destiny was to plunge to around 200 or lower, due to such factors as Kuroda-san's "money-printing" experiment and Japan's debt meltdown.

    The truth (which isn't so important to those JT folks, but I'll state it anyway) is that global investors see the yen -- which is backed by the reputation of the Japanese economy and little else -- as a safe haven. Fund managers, investment bankers, traders, you name it, get a yen for the yen whenever global markets tank, sending its value higher. Pretty strange for an economy that's supposed on the brink, eh?

  • 3

    ghoneim mohamed

    Yen is gonna reach level of 100 yen against dollar in the near future.Nikkei big loss makes it hurry on down faster.huge cash moves from S.East Asia markets to States,its pure speculating,nothing to do with Japan economy or Abecomics,simply because these huge funds know well every single detail about Japanese economy and financial policies,even more than most of Japanese know.The question is what changed know to turn things up down all of a sudden?! Its mere Speculations,they just create and sell reasons and false news to justify money moving,because money never sleeps.According to technical analysis Yen is gonna reach level mentioned above,so its well known.All what is needed some propaganda,big bad news,creating panic,bringing technical analysis into action,but actually this Mafia big show always have big logo MADE IN WALL STREET!!

  • 3

    smithinjapan

    I wish the guy who was on here for half of last year laughing at people and thanking Abe and Co. for intentionally weakening the yen were on here still. I have no doubt he was booted because he laughed and spat on people who said the current policies were going to hurt Japan, and were hurting importers and your average Joe, and he claimed the yen would be 150 on the US$ by now, so where is he? Maybe banging on his desk somewhere, suddenly disliking Abe?

    The saddest part is that Kuroda will blame China and other factors on this, and not be willing to take any blame at all, and Abe will talk about a THIRD wave of arrows to restart Abenomics, and the mass spending will begin again.

  • 0

    BertieWooster

    The yen, which is considered a safe bet in times of uncertainty and turmoil

    Is it?

    Amazing!

  • -2

    Gary Raynor

    BertieWoosterFeb. 10, 2016 - 07:17PM JST

    Is it? Amazing!

    It's very simple really, Japan runs current account surpluses and therefore annually brings in more money than goes out.

    This position will remain the same until the reverse happens.

    There's no other reason and it ain't rocket science.

  • 4

    wipeout

    @sangetsu

    The US has one-third of it's population on welfare; the number of people on food stamps has tripled since Obama took office

    What's your source for the food stamps figure? You're in the habit of crapping out "statistics" without ever mentioning where they come from, and in general, they look highly doubtful. Today is no exception.

    "The number of people receiving food stamps dropped again since our last report, by nearly 142,000. As of October, the most recent month on record, nearly 45.4 million Americans were still receiving the food aid, now known as the Supplemental Nutrition Assistance Program. That’s 5.1 percent lower than the record level set in December 2012, but still nearly 42 percent higher than it was when Obama took office in 2009."

    http://www.factcheck.org/2016/01/obamas-numbers-january-2016-update/

    The information above says +42 percent. You say +200 percent. You're trying to claim nearly five times the actual increase that has occurred. For that to be true, the number of Americans currently on food stamps would have to be 96 million.

    29% percent of the population. FOS my man.

  • 0

    fxgai

    Too many people here appear guilty of trying to fit a narrative to what is happening in the markets.

    shonanbb,

    How can anyone think that the Japanese Yen should be stronger?

    The yen is only stronger relative to what we've gotten used to in recent months. It was well under 100 to the US dollar for a number of years.

    The current yen strength is less a vote of confidence in Japan's economy than it is simply a matter of large investors that borrowed yen to fund investments in more attractive places now liquidating those investments, and buying yen to pay back what they borrowed. This is creating some temporal demand for yen, but with the yen at 115 rather than 75 to the US dollar, it's not the case that it is particularly strong.

    When they want to start investing again, the yen (and the euro) will be at the top of the list to borrow and sell to fund those investments.

    Gary,

    Yes the current account surplus flows are one support for the yen, but it didn't stop the yen weakening under Abe for three years, did it? It alone can't be used to explain the past month's sudden yen strength.

    JeffLee,

    Well, no one on this forum (except me and Guy) ever predicted this, eh?

    When did you predict the yen would strengthen? Just last month you predicted "decent upside" in Japanese stocks, right before the markets started to tank. There is a correlation between yen weakness and upside in Japanese stocks, so it's hard to believe you really thought the yen would get stronger.

    I also do remember deeper in the past you stating that the yen wasn't really crashing under Abenomics, because you thought it had been unsustainably strong when it took less than 80 yen to fetch a US dollar.

    Feel free to dig up a quote though, and show how smart you were.

    global investors see the yen -- which is backed by the reputation of the Japanese economy and little else -- as a safe haven.

    This is nonsense. Short term speculators may try to piggy back on periods of strong demand for yen, due to factors such as I noted above, but that's not because they think it is a safe haven, but because they think in the short term it might gain in value. When circumstances change the speculators will be the first to sell the yen, and longer term investors will be doing the same.

    smithinjapan,

    It must be umbrella you are thinking of :) http://www.japantoday.com/member/view/umbrella

  • 0

    Raymond Chuang

    The biggest problem now is that China needs to work off the stock market "exuberance" from 2015. Unfortunately, it may take a fairly steep recession worldwide to resolve that problem.

  • -3

    wtfjapan

    Awesome! More money to send home to the UK! yep and that about sums it up for the pro strong yen camp, send more money back home and make your imported foreign good cheaper to buy. basically just leaching on the J economy and not really doing anything to the benifit of the economy.

  • -1

    nishinariku

    The yen was 320 to the $ for a Long time. Wish it was at 200 now.

  • 0

    ghoneim mohamed

    When Yen is under 1.15 against dollar,this is considered a beginning of troubles to Japan economy,let alone hurry on down to 100 Yen against dollar,which-as i mentioned before-is gonna happen in the near future.YES,speculator are selling"buying Yen as safe heaven"in troubled markets,but the truth is that it another SPECULATION GAME OF WALL STREET MAFIA.

  • 0

    shonanbb

    Sangetsu: Spewing out numbers with nothing to back it is absurd.

    Food supplement is not welfare. Those people are working but at such low salaries they need help. Now, if Bernie Sanders becomes president, everyone pays taxes no matter what, so even low income people will be taxed on their so called welfare funds.

    Approximately: Income $0 -$20,000 will be taxed at 10%

  • -2

    JeffLee

    @fxgai

    "When did you predict the yen would strengthen? Just last month you predicted "decent upside" in Japanese stocks... "

    Conflating 2 different outlooks; exchange rates and stock prices, eh? Nice try.

    Well, about a year ago or so, while you and others were trying to convince everyone the yen was set to drop like a stone, I brushed off those concerns saying it would probably remain in a moderate range at its then current level, I believe around 110. You thought that was utter heresy, and jumped all over that outlook. So now now are you ready to admit you were wrong?

    As for stock prices, nice omission of context. That was my 2016 outlook....as in the entire year. Not for the first 4 weeks.

    "Short term speculators may try to piggy back on periods...."

    Another one of your fantasies. The financial world -- not merely "speculators -- has hundreds of billions of $ of cash it need to move around at any given time. When there's global uncertainly, one of the first places they go is low-risk Japan. Sorry, that's a fact -- just read the financial press -- albeit one that flies directly in the face of your worldview on Japan. Time to get a new worldview.

  • 6

    Joeintokyo

    Wouldn't it be nice if JT put the current yen/dollar/euro exchange rate as well as the Nikkei Index up in that red banner?

  • 0

    ghoneim mohamed

    With full respect to comment saying,"its not merely speculations whats going on in Yen,but hundreds of billions of $ of cash it needs to move around at any given time,when there is global uncertainty,one of the first places they go is low risk,japan".my question is,what is it called such big round of money movement in such a way,other than speculation?!YES,money has to move whenever there is low risk and more profit,no matter where and how,but this is also mere speculation,What happened in Nikei last days is a big example,its done in highly professional way to create a panic to sell their product Yen as a safe heaven.Am not denying their rights to speculate or do whatever they wanna do,money never sleeps,its true,but i wanna call things by its true names,thats all.

  • -2

    shonanbb

    I would like the world system to go to Barter.

  • 3

    kickboard

    he claimed the yen would be 150 on the US$ by now, so where is he?

    I hope umbrella has changed his job because he claimed to be an FX trader who made "millions."

  • 1

    fxgai

    JeffLee, you claim to have predicted yen strength a year ago (link?), after which yen hit multi-year LOWS and now it is seeing a period of relative strength you are claiming that you were right about it.

    Only as right as a broken clock!

    Your Japan stock upside prediction may be a full year prediction but how you seriously expect to get that right while the yen strengthens is beyond me. The yen would have to weaken again for that to have a chance, so you can't be right on both.

    I guess if you make enough inconsistent predictions with ambiguous time frames you are bound to be as right as a broken clock for at least one!

  • -2

    shonanbb

    I need to sell a ton of dollars, so I want a very weak yen. ¥150 - $1.00 would make me smile.

  • 0

    Mocheake

    Surge, baby, surge! Hopefully, by the time I get ready to go back to the U.S, the rate will be back to 90-95 where it belongs.

  • 0

    Gary Raynor

    fxgai

    Gary, Yes the current account surplus flows are one support for the yen, but it didn't stop the yen weakening under Abe for three years, did it? It alone can't be used to explain the past month's sudden yen strength.

    Sorry it is that simple. Because Japan runs such a large current account surplus, Japan has more assets than liabilities and will continue to be perceived so, as long as Japan runs big current account surpluses. The question of the argument is how long will Japan run such current account surpluses, especially since Japan runs trade surpluses and the current account surplus is due to financial investments and as the dankai generation use their savings, the investments will shrink?

    As for the Yen weakness, that was due to the BOJ interest rates and the 'carry trade' with investors getting loans in Yen and investing in savings in other countries with better interest rates.

    This is why the Yen fluctuates at such steep rates.

  • 0

    John-San

    I know Just one thing on this subject. It no good for tourism short-term ! I can see numbers down for this year Sakura.

  • 0

    sangetsu03

    In the U.S. the economy has now gained nearly five times more jobs under President Barack Obama than it did during the presidency of George W. Bush,

    No, my child, it has not. Currently, workforce participation in America is at 62.8%. From that perspective, fewer people are working in America than at any time since the worst days of the Carter administration. The government has a funny way of coming up with it's unemployment figures; it counts only first-time applicants for unemployment benefits, which can only be collected by workers who are fired, or lose their jobs involuntarily. It does not count anyone who quits, who has applied before, is long-term unemployed, or who has left a temporary position.

    Next, the administration counts part-time, minimum-wage jobs, many of these seasonal, or temporary. But it doesn't subtract those jobs when the seasons or contracts end. It's a bunch of numerical lies and malarky.

    The number of people currently on food stamps in America is almost triple (45.8 million) what it was when Bush was in office (18 million). Such would not be the case if all the people the administration says found jobs were in fact working.

  • 0

    Strangerland

    Currently, workforce participation in America is at 62.8%. From that perspective, fewer people are working in America than at any time since the worst days of the Carter administration.

    Did they change the metrics on how employment is counted at some point? Because if they didn't, this whole thing about 'workforce participation' is just a distraction so that people can complain about employment rates even when they are doing well. In other words, if the way employment rates has been calculated has not changed, then you have a baseline against which to calculate the trends.

  • -2

    tinawatanabe

    workforce participation in America is at 62.8%

    seems high considering 20% are kids and 40% are old if they live to 100 year old.

  • 0

    turbotsat

    @tinawatanabe

    The upper limit for the labor participation rate is age 64, not age 100.

    https://en.wikipedia.org/wiki/Employment-to-population_ratio

    ... This is a statistical ratio that measures the proportion of the country's working-age population (ages 15 to 64 in most OECD countries) that is employed. This includes people that have stopped looking for work. ...

  • -1

    tinawatanabe

    turbotsat, 62.8% seems still high considering the large US population, 3 times Japan's.

  • 0

    Strangerland

    turbotsat, 62.8% seems still high considering the large US population, 3 times Japan's.

    Percentages have nothing to do with population size whatsoever. A small population of 1000 people, in which 628 people are working, will have a 62.8% employment rate. A larger population of 10,000 people, in which 6280 people are working, will also have a 62.8% employment rate. When using a percentage, the size of the population is irrelevant.

  • 0

    turbotsat

    tina, it's a percentage of the population, so I don't know that the size of population has that much to do with it.

    Also the number was brought up as a complaint about the trend in the USA, so no use to compare with Japan.

    There's a world table at wikipedia, updated to 2013: https://en.wikipedia.org/wiki/Employment-to-population_ratio#Employment-to-population_ratio_in_the_world

    The definition excludes anyone who worked 1 hour in a week.

    2013 numbers in the table are 71.7 % for Japan, 67.4 for USA.

  • -1

    tinawatanabe

    2013 numbers in the table are 71.7 % for Japan, 67.4 for USA.

    I know. My point is the larger the population the harder to have high employment. And there is the scale merit. You can do much more with 67.4 % of 3 times population than 71. 7% of Japan's population.

  • 0

    takeda.shingen.1991@gmail.com

    I know. My point is the larger the population the harder to have high employment.

    Not true. A higher population means more consumers, which in return demands more workers.

  • 0

    fxgai

    JeffLee,

    The financial world -- not merely "speculators -- has hundreds of billions of $ of cash it need to move around at any given time. When there's global uncertainly, one of the first places they go is low-risk Japan.

    Japan is low-risk, negative-return.

    What the financial world does when there is global uncertainty, is unwind global investments and buy back yen (and euros) that was initially borrowed to fund those investments. Currency speculators jump on for the ride.

    Investors are not suddenly "investing" in Japan when this happens. There is no reason to "invest" in Japan. Japanese bonds now offer a negative yield, and Japanese stocks selling off indicates that investors are liquidating, not investing, despite claims of Japan's "save-haven" status.

    Gary,

    I agree that the BOJ actions were behind the yen weakness, but not that the current account surplus caused this sudden strength in the yen. It is a yen positive factor, but it doesn't have much of an impact compared with other factors IMO.

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