Despite Japan’s massive investment last month to try to stabilize the yen, but the dollar-yen exchange rate stabilized at 157.25 on June 3, the yen depreciation trend may continue. Analysts note that the USD/JPY exchange rate is currently in an uptrend, with USD/JPY hovering above the 50-day and 200-day EMAs.
On May 31, Japan’s Ministry of Finance data confirmed that the government quickly conducted two rounds of large-scale dollar selling after the yen/dollar plunged to a new 34-year low on April 29 (160.245).Daisaku Ueno said the scale of the intervention was more than expected, showing that the Japanese authorities’ firm stance on the fight against inflation, and that the intervention is expected to continue.
Japan used huge foreign reserves to stabilize the yen, but the effect is limited. Markets are staring at the yen’s 160 mark as the authorities’ bottom line. Shunichi Suzuki warned that big fluctuations will trigger action and that FX stability is important.
While the April-June quarterly numbers are due in August, yen woes stem from a strong U.S. economy, delaying expectations of a Fed rate cut while the Bank of Japan steadily raises rates.
Last week, during the G7 finance meeting, Japan again raised the issue of controlling yen depreciation.
The head of Japan’s SMBC hinted that it may continue to intervene in the yen’s depreciation, but need the support of other countries. The U.S. Treasury Secretary advocates market-determined exchange rates, against excessive intervention. Mizuho Securities predicted that if the yen depreciated to 158, Japan may again intervene and support from the G7. the head of the IG market suggested that, in view of the market changes, Japan should seek new strategies to strengthen the yen.
Here are some possible strategies and recommendations for a possible continuation of the yen depreciation trend:
Continue to monitor the exchange rate and keep an eye on the yen to see if it approaches or breaks the 160 mark, which could be the bottom line for the authorities. Formulate a new stabilization strategy, and consider supporting the domestic economy through a variety of measures, including fiscal policy and industrial policy, to increase the value of the yen. Strengthen risk management, for enterprises and individuals, should strengthen exchange rate risk management and take appropriate measures to minimize losses from yen depreciation.
The trip will require multiple efforts and measures to deal with the depreciation of the yen, while remaining calm and avoiding blind action.
