Appreciation of the Yen May Become a Bad Example
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I am afraid that following the sharp appreciation of the yen in Europe after the debt crisis, the recent turmoil in global financial markets triggered the biggest risk factors.
Sharp appreciation of the yen Why? No lack of "recovery differences", "the set of interest rate differential disappears, said," "High Additional reservoir to support said," and even "China push up the yen to buy Japanese government bonds, said," and so interpretation of these reasons, there does have some truth, some of it is "nonsense." Why the sharp appreciation of the yen, the deep reason behind what is probably the major long-term monetary policy of Japan-related misconduct.
Early 90s of last century, a serious blow to the asset bubble burst in the Japanese economy. "Bubble economy" since the collapse of the Japanese economy has been in a contraction in asset prices, as a large investment in equipment during the bubble reduction in the capital stock of the economic system needs to be adjusted.
1997 Asian financial crisis more directly to the Japanese economy a heavy blow. February 1999, in view of the business was facing the crisis of major banks, the Bank of Japan short-term financial markets (specifically the inter-bank market) short-term target interest rate (specifically for the unsecured overnight bank lending rate) from 0.5% to zero, introduced an unprecedented so-called "zero interest rate policy."
Japan's quantitative easing monetary policy, the reserve currency to reach 400 billion yen or more, based on money supply growth rose 10% from previous 20%. But at the same time, demand gap, an aging population and the "liquidity trap" the Japanese into a so-called "growth recession", ie an economy, although growing, but long-term shortage of capacity utilization, continue to promote the drop in prices, resulting in a deflation is expected to , which further prompted Japan to adhere to the policy of low interest rates and the weak yen, the formation of Japan's "low growth, low inflation, low interest rates, weak currency," the vicious circle.
The biggest impact of low interest rate policy is to make the yen a global arbitrage and long-term funding currency. Japan's long-term low interest rates and other major international currencies on the formation of a great interest rate spreads, which attracted a large number of international arbitrage and speculative investors, speculators and investors to a large number of these low-interest loan from the Japanese yen, the investment foreign high-yield financial products.
Prevalence of the yen carry trade, international financial markets for over 10 years time, it is estimated that the financing before the financial crisis of the yen carry trade on a scale of up to 100 billion to 1 trillion U.S. dollars.
Global yen carry trade flourish, precipitated the massive yen. Since the financial crisis, the Federal Reserve, European Central Bank also began to start "quantitative easing" monetary policy, most central banks have substantially reduced the benchmark interest rate, resulting in Japan and other countries, narrowing spreads, the more the yen carry trade is facing to open the greater the pressure, that is, high-yielding currencies to sell assets to buy the yen closed at the same time, the continued appreciation of the yen into the channel.
Since April of this year, the euro zone sovereign debt crisis escalation turbulence, the euro depreciated sharply, but with the start-relief mechanism, the European debt crisis died down, since the third quarter, the focus of global economic risk is transferred again, the recent deterioration in U.S. economic data sparked widespread concerns about the U.S. economy, the dollar devaluation. As of today, the dollar index has moved from early June high of 88.49 dropped to 80 below.
Since April of this year, the yen advanced against all major emerging market economies and the sharp appreciation of currencies, U.S. dollar against the yen in early September is approaching in May 1995 the lowest level of 83.2. April so far, the U.S. dollar against the yen has dropped more than 10% of the euro against the yen and more than 15% decline in the yen against the currencies of major emerging economies of Asia are also rising.
Sharp appreciation of yen, the negative impact of exports to Japan has become increasingly prominent. Since February this year, Japanese exports have contracted for 5 months, from the bottom of the nascent recovery to 2005 levels. Although the trade surplus from the bottom of the rapid rebound of crisis, has now recovered to 2008 levels, but the contribution of net exports to GDP in the first quarter from 0.7% to 0.5% in the second quarter. The rapid appreciation of the yen, the Japanese economy is a "worse", the Japanese in the second quarter GDP growth of 0.4% annual rate, an increase of the lowest three quarters. Appreciation of the yen led to reduced imports not only the "export-dependent," the Japanese economy once again into the valley, but also add to the "imported deflation" pressure "weak economy" hard to resist the "strong currency" impact.
end of August, the Bank of Japan decided to expand the supply of funds with low interest rates to counter the appreciation of the yen. September 10 the Japanese government has introduced a new economic measures intended to prevent further appreciation of the yen, the yen exchange rate has not been dropped, but accelerate the appreciation of the Sept. 15, the Bank of Japan sold yen finally shot a large number of unilateral direct intervention in currency markets.
Japan's direct intervention in the exchange rate is not the first, in March 2004, the Bank of Japan spent 14.8 trillion yen, but has proven ineffective. From the current situation, interest rate disappear, the global spread of the yen back is the fundamental driving force pushing up the yen, this power does not disappear, the long-term trend of appreciation of the yen is unlikely to change.
At present, the Japanese government sold a lot of yen, will not only lead to a serious global financial market turmoil will lead to exchange rate policy, the abuse of other countries. Japan not to long-term monetary policy from its own misconduct to find a cause, but regardless of the cost of the risk transfer to other countries, this is likely to be a "bad example", causing countries imitated. Asian currencies recent sharp appreciation of the collective, except the yen, the Singapore dollar, Korean won, Thai baht, Malaysian ringgit, the rupiah against the U.S. dollar over the years have hit a new high, causing the government and monetary authorities in Asia great concern. The face of the continuing surge in the local currency, except Japan, Singapore banks, the Bank of Thailand, Bank of Korea also began brewing for intervention in currency markets when necessary. Future action to strengthen the global currency intervention, the United States, Europe and Japan have adopted a "self-ism" and seek "to maximize its national interests", the world's dominant currency devaluation initiative will trigger a global scale, "devaluation race." When countries have adopted a "beggar thy neighbor" monetary policy |
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Author Resource:-
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By :
Jessie Stone
Submitted
2010-09-29 17:34:52 |
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