Future JPY/USD rates

[sutebayashi]

PPI in Japan came in around 9% recently - producer prices feed into consumer prices in normal economies, and the ongoing yen weakness will make inflation worse here too - but unlike other developed market economies the BOJ is reluctant to change monetary course, and the governments best idea is to pay subsidies to help them cope with the inflation… rather than deal with the underlying issues.

I saw Fast Retailing’s Yanai CEO out with critical comments on yen weakness, suggesting something needs to change, rather than just dishing out more money. Amen Yanai-san.

What happens politically and monetarily is impossible to predict, but so long as things continue as they are, I personally see no reason currently to think the yen could strengthen anytime soon, versus the US dollar.

With higher rates overseas it’s a no brainer to park cash there and earn interest that one won’t get holding yen. But I do expect something politically to change that will see things revert for a time… I can’t see the LDP continuing as things are. Inflation is bad news (except if you are a deeply indebted government perhaps…)

[TJKansai]

With higher rates overseas it’s a no brainer to park cash there and earn interest that one won’t get holding yen.

So assuming you have a choice regarding credit cards, which would you do, spend on a USD card or a JPY card?

[sutebayashi]

Hmm hadn’t thought much about spending... I only have JPY credit cards myself, but don’t do a lot of spending to begin with. I’m a pretty frugal type!

[sutebayashi]

I saw something I thought was really interesting on the news morning: Apparently Japan’s army of retail forex traders have been more active than ever lately, and the number of 1,000 trillion yen was mentioned (maybe trading volume) as being a record, that makes retail traders about half the Tokyo market alongside hedge funds.

1,000 trillion yen dwarfs the amount that the ministry of finance spent buying up yen (so they are sneezing into the wind with that approach).

Also mentioned was that it seems these retail forex traders are trend-following these days - typically they would behave more contrarian style, selling dollars after the dollar appreciates to take profits. But now they are selling yen and buying dollars along with the trend.

So that last part was interesting. If the army of forex traders are all long USD/JPY, when something happens, there will presumably be a lot of yen buying pressure, as they unwind their positions and lock in profits.

So long as there is the interest rate differential, it is harder for them to actively short USD/JPY, but closing their longs - at some point - is a certainty.

What might trigger that is probably of great interest to the ministry of finance, since intervention didn’t have much effect. Maybe time might be all it takes for a period of profit taking, translating into some reprieve for the yen weakness. All those speculative “Mrs Watanabe”’s will be wanting their profits sooner or later.

A commentator on the news was pointing at hedge funds closing their books for the year as one possible trigger.

[Gulliver]

Apparently you better add ¥500 to your survey. A panicked looking Japanese friend insisted I read this article today .
https://news.yahoo.co.jp/articles/e421 ... 5593727dcc

[sutebayashi]

The article is by Takeshi Fujimaki, I am admittedly a fan of his. He has been bearish on the yen for I guess decades now, and is having some time in the sun recently with the yen’s bad year.
In his long term view he thinks Japan will have hyperinflation, and the BOJ will be replaced with a new central bank and new currency, similar to Germany before the Bundesbank.
Not a happy scenario, but I think most folks here have plenty of overseas investments so would be well covered in the worst case scenario. Fingers crossed

[TJKansai]

Apparently you better add ¥500 to your survey. A panicked looking Japanese friend insisted I read this article today .
https://news.yahoo.co.jp/articles/e421 ... 5593727dcc

At some point, overseas investors would become very interested in various assets and need yen to buy. Tourism would boom too, though that wouldn't be enough to dent the rate.

[TokyoBoglehead]

Apparently you better add ¥500 to your survey. A panicked looking Japanese friend insisted I read this article today .
https://news.yahoo.co.jp/articles/e421 ... 5593727dcc

At some point, overseas investors would become very interested in various assets and need yen to buy. Tourism would boom too, though that wouldn't be enough to dent the rate.

I disagree. Tourism and international money will barely dent it.

Until the US stops raising rates, this will continue. It is quite possible Novembers rake hike will see the YEN fall further.

[Ax6isB]

[/quote]

I disagree. Tourism and international money will barely dent it.

Until the US stops raising rates, this will continue. It is quite possible Novembers rake hike will see the YEN fall further.
[/quote]

You open for new job opportunities? I think you’d be a much wiser steward of money than the current fools that keep throwing billions hoping to see the rates stabilize.

They’ve been wanting inflation for decades and had a policy to print money to do exactly what is happening. Now….whoops, we’re wrong and the textbook was right?

I think it’s a really big mess ahead.

[TokyoBoglehead]

I disagree. Tourism and international money will barely dent it.

Until the US stops raising rates, this will continue. It is quite possible Novembers rake hike will see the YEN fall further.

You open for new job opportunities? I think you’d be a much wiser steward of money than the current fools that keep throwing billions hoping to see the rates stabilize.

They’ve been wanting inflation for decades and had a policy to print money to do exactly what is happening. Now….whoops, we’re wrong and the textbook was right?

I think it’s a really big mess ahead.

Japanese inflation is not organic it is caused by rising prices abroad and a strong US dollar. Japanese policy has not caused this inflation, they wish it had, trully.

The world is held hostage the the FED, raising rates, and the strong attraction of high risk-free yield from US treasuries. Japan has to sit back and wait for the US to calm inflation, there is nothing else to it.

Japan cannot raise rates without causing significant pain to its citizens and businesses, more so than a weak yen has caused. That will probably remain true for some time, and the yen has further to fall.