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CapitalPanda | Where is Yen right now?

Latest news

Read current news from the financial markets and expert articles from our analyst.

Where is Yen right now?

Status[1]

According to a Nikkei survey of experts, consumer prices in Japan are on track to climb 2% this month for the first time since 2015. Despite the Bank of Japan's efforts to ensure stable 2 percent inflation since then, prices last rose at that rate in March 2015, following a consumption tax rise. [a]

Prices are steadily rising, according to real-time retail statistics. As of April 20, 2022, the Nikkei CPINow daily price index, based on point-of-sale data, showed prices up 1.6 percent year on year. Since March, the indicator has been over 1%.

Taro Saito of the NLI Research Institute predicts that price rise will remain around 2% in 2022, peaking at 2.3 percent in October. At the same time, in a report, Yoshiki Shinke, an economist at Dai-Ichi Life Research Institute, stated: “The consumer price index could stay above 2% this year and go even higher depending on whether businesses pass on more of their rising costs.”[2] [b]

Last Monday, BOJ Governor Haruhiko Kuroda stated unequivocally that he has no intention of tightening policy for the time being since the cost-push character of current inflation will stymie the epidemic recovery, making economic assistance his top priority. [c]

In other words, if the average inflation should go too high, we can expect end of negative interest rates. After more than 11 years, interest rates in Japan[3] might possibly rise to positive territory. [d]

YEN1*

Image 1: Japan’s interest rates in the last 25 years (source: TradingEconomics/BOJ)

Performance

Last couple of months wasn’t so good for Japanese Yen. The unrelenting selling of the yen appears to be coming to a halt, and some positive comments is starting to emerge.

In a report issued Tuesday, Goldman Sachs Group Inc. praised the currency as a good recession hedge and emphasized its "considerable value." In a report the same day, Scotiabank analysts argued for a moderate yen resurgence.[4] [e]

YEN2*

Image 2: JPY performance in the last 12 months (source: TradingView.com)

As can be seen in Image 2, in less than 60 days, the US dollar strengthened by more than 14% against the Japanese yen. The main cause for the yen's decline versus the US dollar is the Bank of Japan's determination to continue aggressively easing monetary policy, extending the policy divergence with the Federal Reserve.[5] *

However, looks like there could be an end very soon, and JPY could be once again a safe haven currency in this turbulent global economic environment. [f]

 

 

Overview report prepared by Jozo Perić, Head of Portfolio Management Department and Investment Research Department

 

[a-f] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.

 

*Past performance is no guarantee of future results.

 

[1] Nikkei survey: https://asia.nikkei.com/Economy/Japan-inflation-to-reach-2-in-April-for-1st-time-since-2015-survey

[2] Bloomberg Yen: https://www.bloomberg.com/news/articles/2022-05-06/economists-see-japan-s-inflation-hitting-at-least-2-1-in-april

[3] Japan interest rates: https://tradingeconomics.com/japan/interest-rate

[4] Yen positive signals: https://www.bnnbloomberg.ca/goldman-says-yen-shows-significant-value-as-a-recession-hedge-1.1764084

[5] BOJ and FED divergence: https://www.bnnbloomberg.ca/yen-tumbles-to-seven-year-low-as-boj-divergence-with-fed-widens-1.1743885

The content of this material constitutes marketing communication and should not be considered as any type of investment advice and/or investment research and/or a solicitation for any transactions. This material was prepared for informational/educational purposes only and does not imply an obligation to perform investment transactions nor does it guarantee or predict future performance. BCM Begin Capital Markets Cy Ltd and its relevant persons including affiliates, agents, directors, or employees do not guarantee the accuracy, validity, timeliness, or completeness of any information/data provided by third parties and assume no liability for any loss arising from any investment made based on the said information/data. Past performance is no guarantee of future results.

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