Currency Manipulation/ and our NISA.

[sutebayashi]

I think the MoF people are just trying to buy some time, in the hope that the yen’s value can hang in there a little longer until something favourable happens overseas to give the yen some reprieve.

I was surprised after May, June how long it took the yen to fall back to below the intervention levels, I thought it would fall back faster. But there they go again last week. Your 400,000 will likely be back before the end of summer or earlier, no?

It is a lame duck approach to my eyes, if the authorities want a strong stable currency they will need to explicitly adopt such policies!

Edit - I see my paper yen loss was 1.27%. No too bad actually.

[Deep Blue]

https://www.japantimes.co.jp/business/2 ... se-impact/

The average of year-on-year price increases seen by respondents was 15.7%, up from 14.2% in the March survey.

Pretty brutal hit to disposal income for the majority.

[Tsumitate Wrestler]

The MOF needs to buy time until the American lowers rates. They also need to show currency speculators that there is an inherent risk in betting against the yen.

They timed their yen purchase with the CPI release in America, riding the momentum of the market digesting the data.

If the Americans do indeed lower rates in September, as the market currently predicts they will, this intervention may be the last, and the most effective.


[Maket data shows currently most participants have priced in a September drop of.25%}
https://www.cmegroup.com/markets/intere ... -tool.html

[Bubblegun]

The MOF needs to buy time until the American lowers rates. They also need to show currency speculators that there is an inherent risk in betting against the yen.

They timed their yen purchase with the CPI release in America, riding the momentum of the market digesting the data.

If the Americans do indeed lower rates in September, as the market currently predicts they will, this intervention may be the last, and the most effective.


[Maket data shows currently most participants have priced in a September drop of.25%}
https://www.cmegroup.com/markets/intere ... -tool.html

You're probably right. When we talk about IMPORTS becoming more expensive, Japan isn't an importer in isolation, other countries import Japanese goods. but the strengthening only makes buying Japanese imports more EXPENSIVE for them. Feels like a twin-edged sword.

So why on earth is this sooooo terrible at 157 yen to the dollar but the 250 yen to the dollar was seen as great in the 80s? I remember the economy booming, we were all buying cheap Japanese cameras, radios, phones, record players, walkmans, PlayStations, Games, etc etc. Japan was still importing Chemicals, Oil, Food, Gas, Steel, and Coal. at 250 yen as they were all paid for in dollars. Salarymen are still putting in their overtime, still competing against the same countries. If was importing oil in the 80s I'm still importing oil in the 2020s.
I wish economics was taught more at school instead of rocket science-level math. LOL. I would have had more use for that.

[Deep Blue]

Inflation, purchasing power parity… you can’t compare an exchange rate 40 years ago with one today without making the appropriate adjustments la.

[Bubblegun]

Inflation, purchasing power parity… you can’t compare an exchange rate 40 years ago with one today without making the appropriate adjustments la.

Thanks for that. Unfortunately, I have no idea how that works in my real-life situation today and how I can compare and contrast it the past with the present to make an informed comment. Sorry for my ignorance on that. We understand things were much much cheaper in the past compared to today.

I also have a problem when I see people talking about saving money for say 35 years, and say OMG look how much money you have. Having 40 million yen in 35 years sounds really awesome but in reality that is a pyscholigical "anchor point" rooted in TODAYs value. But it could be say less than 20 million yen in real living costs. Especially when you are talking about purchasing power parity.

In an attempt to understand your idea more i even ran it through chatGPT and see what it said. Here7s what i got.

Purchasing Power Parity (PPP) is a concept used to compare the relative value of currencies between countries, ensuring that a given amount of money has the same purchasing power in different countries. Let's compare Japan's situation in the 1980s with that in 2024:

Japan in the 1980s:

Economic Boom: During the 1980s, Japan experienced a period of rapid economic growth and became the second-largest economy in the world after the United States. This economic boom was fueled by strong exports, particularly in electronics and automobiles.

Yen Appreciation: The Japanese yen appreciated significantly during this period, reaching record highs against the US dollar. This affected Japan's PPP calculations, as a stronger yen meant Japanese goods and services appeared more expensive compared to those in other countries.

High Cost of Living: Japan's cost of living was relatively high in the 1980s, especially in urban areas like Tokyo. This was reflected in PPP calculations, where prices of goods and services were adjusted to account for these higher costs.

PPP Index: Japan's PPP index would have been influenced by the high prices and strong currency during this period, reflecting a relatively high cost of living compared to other countries, especially for imported goods.

Japan in 2024:

Economic Stagnation: Since the late 1980s, Japan has faced economic challenges, including a prolonged period of economic stagnation and deflation, known as the "Lost Decades". This has affected its GDP growth and overall economic performance.

Yen Fluctuations: The Japanese yen has fluctuated over the years, sometimes weakening against major currencies like the US dollar. This affects Japan's PPP calculations, as a weaker yen would make Japanese goods and services relatively cheaper compared to other countries.

Cost of Living Adjustments: Japan's cost of living remains high, but compared to the booming 1980s, there has been adjustment and stabilization. Urban areas like Tokyo are still expensive, but not as disproportionately high as they were during the economic bubble.

PPP Index Today: In 2024, Japan's PPP index would likely reflect a balance between the relatively high cost of living and the currency fluctuations experienced over the years. It may show that Japan is still an expensive country to live in, but not to the extent seen during the economic bubble.

In summary, while Japan experienced a period of economic boom and high PPP in the 1980s, characterized by a strong yen and high cost of living, its situation in 2024 reflects a more tempered economic reality with fluctuations in currency values and adjustments in living costs, though still generally high compared to many other countries.

[Tsumitate Wrestler]

Inflation, purchasing power parity… you can’t compare an exchange rate 40 years ago with one today without making the appropriate adjustments la.

Thanks for that. Unfortunately, I have no idea how that works in my real-life situation today and how I can compare and contrast it the past with the present to make an informed comment. Sorry for my ignorance on that. We understand things were much much cheaper in the past compared to today.

I also have a problem when I see people talking about saving money for say 35 years, and say OMG look how much money you have. Having 40 million yen in 35 years sounds really awesome but in reality that is a pyscholigical "anchor point" rooted in TODAYs value. But it could be say less than 20 million yen in real living costs. Especially when you are talking about purchasing power parity.

In an attempt to understand your idea more i even ran it through chatGPT and see what it said. Here7s what i got.

Purchasing Power Parity (PPP) is a concept used to compare the relative value of currencies between countries, ensuring that a given amount of money has the same purchasing power in different countries. Let's compare Japan's situation in the 1980s with that in 2024:

Japan in the 1980s:

Economic Boom: During the 1980s, Japan experienced a period of rapid economic growth and became the second-largest economy in the world after the United States. This economic boom was fueled by strong exports, particularly in electronics and automobiles.

Yen Appreciation: The Japanese yen appreciated significantly during this period, reaching record highs against the US dollar. This affected Japan's PPP calculations, as a stronger yen meant Japanese goods and services appeared more expensive compared to those in other countries.

High Cost of Living: Japan's cost of living was relatively high in the 1980s, especially in urban areas like Tokyo. This was reflected in PPP calculations, where prices of goods and services were adjusted to account for these higher costs.

PPP Index: Japan's PPP index would have been influenced by the high prices and strong currency during this period, reflecting a relatively high cost of living compared to other countries, especially for imported goods.

Japan in 2024:

Economic Stagnation: Since the late 1980s, Japan has faced economic challenges, including a prolonged period of economic stagnation and deflation, known as the "Lost Decades". This has affected its GDP growth and overall economic performance.

Yen Fluctuations: The Japanese yen has fluctuated over the years, sometimes weakening against major currencies like the US dollar. This affects Japan's PPP calculations, as a weaker yen would make Japanese goods and services relatively cheaper compared to other countries.

Cost of Living Adjustments: Japan's cost of living remains high, but compared to the booming 1980s, there has been adjustment and stabilization. Urban areas like Tokyo are still expensive, but not as disproportionately high as they were during the economic bubble.

PPP Index Today: In 2024, Japan's PPP index would likely reflect a balance between the relatively high cost of living and the currency fluctuations experienced over the years. It may show that Japan is still an expensive country to live in, but not to the extent seen during the economic bubble.

In summary, while Japan experienced a period of economic boom and high PPP in the 1980s, characterized by a strong yen and high cost of living, its situation in 2024 reflects a more tempered economic reality with fluctuations in currency values and adjustments in living costs, though still generally high compared to many other countries.

You understand how compound inflation works, right? The magic behind investing?

Inflation is essential the same mechanism, except it is applied to the price of goods getting gradually more expensive over time, the effect compounds.

Japan has had low inflation for decades, but now has inflation at around 2-3% (varies with metrics).

So, in the past keeping money on the bank and not investing in Japan was fine for the average Sato. However, if these inflation rates continue their money will lose purchasing power over time, making ever yen, worth less in real terms.

Interest rates basically must remain relatively low in Japan due to the massive amount of government debt Japan has issued, this rate also sets mortgage rates. All this means that bank deposits probably won't grow with inflation long term.

This is why the government is desperate to promote schemes like ideco and Nisa because most Japanese citizen have no plan beyond pension, and saving cash.

When you add a low yen, prices continue to inflate, and start to eat away at savings and reduce consumer spending.

The government has few levers to pull, and the average citizen is hurting, so they can either wait out the FED hoping they lower US rates and the yen recover, or they can attempt to stem the yen/usd from running in the wrong direction by spending their foreign currency reserves.

[Bubblegun]

You understand how compound inflation works, right? The magic behind investing?

Inflation is essential the same mechanism, except it is applied to the price of goods getting gradually more expensive over time, the effect compounds.

Japan has had low inflation for decades, but now has inflation at around 2-3% (varies with metrics).

So, in the past keeping money on the bank and not investing in Japan was fine for the average Sato. However, if these inflation rates continue their money will lose purchasing power over time, making ever yen, worth less in real terms.

Interest rates basically must remain relatively low in Japan due to the massive amount of government debt Japan has issued, this rate also sets mortgage rates. All this means that bank deposits probably won't grow with inflation long term.

This is why the government is desperate to promote schemes like ideco and Nisa because most Japanese citizen have no plan beyond pension, and saving cash.

When you add a low yen, prices continue to inflate, and start to eat away at savings and reduce consumer spending.

The government has few levers to pull, and the average citizen is hurting, so they can either wait out the FED hoping they lower US rates and the yen recover, or they can attempt to stem the yen/usd from running in the wrong direction by spending their foreign currency reserves.

Thanks for that. I see what you're saying in regards to compounding and the loss of value over time. You've basically confirmed a lot of what i thought.

When you add a low yen, prices continue to inflate and start to eat away at savings and reduce consumer spending.

Isn't this what the Japanese government really wants/needs? to reduce government down!