“Without criticism, it mentioned that Japanese authorities intervened in foreign exchange markets in April and May for the first time since October 2022, in an attempt to deal with the yen's rapid depreciation against the U.S. dollar.”
Isn’t the irony here that the BoJ intervention was to prevent further depreciation of the yen which would exacerbate the trade surplus imbalance? I imagine that’s a hard move to criticize.
This is difficult to understand, but doesn't the US accuse Japan of deliberately leading the yen to weaken? Therefore, it says there is no problem with this year's intervention because it led the yen to strengthen.
No, Japan is not attempting to weaken the yen. They're just not raising interest rates because they have far lower inflation than the rest of the developed world, which is causing the yen to weaken relative to the other countries (because capital flows towards high interest rate currency). The yen is weakening literally because they're doing nothing (which, by the way, is the correct move).
Oh yeah I get it I'm from Chile, it was more of a question. For example here we always have eaten a lot of bread. 15 years ago, I used to go buy a kilo for around 1000 CLP. Nowadays is 2000/3000 depending on where and what bread (lots of options I guess?). 30-40 years ago we used to produce almost all wheat for internal use, nowadays is like 30% tho, so it's for various reasons.
Here in the U.S. it’s crazy. Getting a stick of deodorant is like $10. A lot of it is corporate greed using inflation as an excuse to jack up prices while still having higher than ever profits. Tho funny enough, doing that shit has kinda lead to the big shoplifting problem we’re having. And shoplifting just causes stores to raise the prices even more + spend more money for anti-shoplifting measures.
No, It's reality. Real wages have outpaced inflation in the US.
This isn't to say it isn't psychologically affecting to see higher prices on items and it certainly makes wage growth less impactful.
>The yen is weakening literally because they're doing nothing (which, by the way, is the correct move).
Not when you are a net importer of oil and food…
Japan’s cost of living crisis is going to exacerbate the weaker the yen gets.
You are correct that the weak yen does exacerbate those problems, and you nailed it that the energy costs are where Japanese are feeling it the most. But about 85% of Japan's supply chains are entirely domestic, so even with the yen weakening by what, 20% in the last year? Japan's inflation remains below any of the other G7 countries with much higher rates. Energy costs are going up, but the example I like to use is that your ¥1000 salaryman lunch from 5 years ago is still siting pretty at ¥1000, whereas in the US a Big Mac combo now costs *$18*. Consider Japan's inflation is at 2.5% right now, (which is not nothing) whereas the US's inflation was at **9%** at one point and has been above Japan's current rate for almost the entirety of the Biden presidency (since March of 2021). I use the US for comparison because they're the world's largest economy, and because I've lived in both the US an Japan over the last 4 years, but it's not limited to them. The EU's inflation rate peaked above **10%** and, like the US, remains above Japan's rate even now. Because these numbers are exponential, this means that both the dollar and the Euro have lost something like 30% of their purchasing power over the last 3.5 years, whereas the Yen has lost something like 9%.
>Japan’s cost of living crisis is going to exacerbate the weaker the yen gets.
Again, not to dismiss this, because it's fucking tough out there, but the fact is there is a cost of living crisis *everywhere in the world* right now, not just Japan. And of developed countries, Japan is arguably hit the least hard.
Consider also that the Japanese real estate market is dominated by variable interest rate mortgages (approximately 70% of all Japanese mortgages are variable rate)- meaning an increase in interest rates from the BOJ increases the housing payment of 70% of Japanese homeowners, and makes buying a house less affordable for anyone who doesn't own one. So, in addition to generally slowing down the economy (which is what rates are supposed to do- they are literally just a way of tempering inflation by damaging the economy), there is a good reason to think that they might actually make things MORE expensive for the Japanese on average. Which, again, points to the idea that doing nothing is actually the correct move.
And all of THAT is without mentioning the corresponding BENEFITS that the weak yen has on a manufacturing-based economy like Japan's, which /u/MoneyFunny6710 touched on briefly.
> meaning an increase in interest rates from the BOJ increases the housing payment of 70% of Japanese homeowners
*Kind of*. Japanese variable rate mortgages place limits on how much the monthly payment can increase. The interest goes up, but the month to month payment doesn't move all that much. What happens instead is that the length of the loan gets longer. It still sucks, of course, but it isn't likely to cause a wave of bankruptcies or people not being able to feed themselves.
> Japanese real estate market is dominated by variable interest rate mortgages (approximately 70% of all Japanese mortgages are variable rate)- meaning an increase in interest rates from the BOJ increases the housing payment of 70% of Japanese homeowners
In the UK this happened and not only did it increase the costs for homeowners, it also led to a 30-50% increase in rents due to buy-to-let mortgages increasing. Previously worked out that a buy-to-let on a standard £500k flat in London went from ~£625 to ~£1640 in mortgage payments so landlords tried to make that 1k back from the tenants.
Thats the plan, however Japan is dumping lots of USD to prop up the yen.
There is some conspiracy theories out there suggesting that Japan's intervention and J. Powells dovish tone are related. I even heard rumors that the last set of intervention confirms that BOJ, Tokyo, and the Fed were in communication and guided Tokyo on intervention.
All rumors of course, but it basivally points to BOJ holding steady and hoping the Fed will lower rates in a soonish time frame.
Also fun fact, Apple also announce one of the largest share of buy backs, exceeding the amount of money Japan used for intervention.
Apple buy backs $100 bln, Japan intervention $23 Bln, Japan has about 1tln in reserves
Hmm I see, I do wonder if dump USD to prop yen with reserve but I wonder if Japan can replenish those reserves with exports. I know you said it's a conspiracy theory but it would be an interesting situation.
100 bln on buy backs? That's huge lol, but I bet investors are happy. It's also crazy a single company can move more money than a country's central bank in a single trade. But yeah, I haven't been following the US market for a while, last I checked a bunch of low mid-cap bank stocks were crashing and JPow was still increasing interest rates. And only APPL, TSLA, and NVDA were doing well. This was back during the spring-summer of 2023
Any idea if commercial real estate or corporate loans are under the same pressure if BOJ raises interest rates? I knew home mortgages were all variable rates, but no idea if corporate borrowing might be a bigger problem and possibly the main reason BOJ hasn't raised rates.
>Which, again, points to the idea that doing nothing is actually the correct move
I honestly see Japan’s monetary policy management as a vacuous pit where there basically aren’t alternative options because the policy has been fucked up for more than 3 decades, hence there is “do nothing”.
But in terms of fiscal policy, there’s a lot the Japanese government can actually do, but Kishida and the LDP are too brain dead to stop to consider doing.
I read that Japan is actually benefiting from the weak yen, because it increases the export of the large Japanese companies, mostly the carmakers. And it has a positive effect on tourism, at least economically.
issue is japan imports alot of energy which is a massive pain both consumers and the industries here
and for us foreigners here that has to visit the US or other western countries for family and etc we are hit hard by the inflation there, because everything is so much more expensive and the deprecating yen doesnt help
The import of energy & materials to produce products that are then exported does not matter. It's a wash. The cheap labor due to the weak yen is a huge benefit.
However for anything sold domestically, the cheap yen drives up prices.
***
**Edit:** The downvotes crack me up. When using imported materials to produce a product for export, the cost of the imported materials is covered by the foreign currency paying for the exports.
Using exports to the US and USD as an example, oil, gas, iron, etc etc are all priced in USD. The end product is sold in USD. USD-USD. It cancels. It doesn't matter if the JPY is strong or the JPY is weak. Income in USD, expenses in USD.
If the end product is being sold in Europe and the material & energy costs are in USD then the EURUSD rate is what matters because ultimately it is all being paid for with EUR, and the expenses are in USD.
It's not a bad point for consumable commodities but there's still a lag and going to be a drop in purchases if raw material cost increases lead to an increase in the export price due to sticker shock. People buying steel are going to but steel no matter what, but people looking at Pikachu plushes might change their mind and just not buy anything if the prices go up quickly.
Let's say a given widget sells for $100, and contains $20 worth of "imported energy & raw materials".
# Ignoring Japanese domestic labor & material costs:
We ignore the cost of labor and domestic materials in Japan and purely look at how the USDJPY impacts materials costs.
## Example 1:
A given widget sells for $100, and contains $20 worth of "imported raw materials and energy".
### USDJPY=110:
| Description | Calculation | Amount |
|------------------------------------------|--------------------------------------|----------|
| Imported raw materials and energy (JPY) | $20 * 110 | 2,200en |
| Sale price (JPY) | $100 * 110 | 11,000en |
| Profit | 11,000en - 2,200en | **8,800en** |
### USDJPY=160:
| Description | Calculation | Amount |
|------------------------------------------|--------------------------------------|----------|
| Imported raw materials and energy (JPY) | $20 * 160 | 3,200en |
| Sale price (JPY) | $100 * 160 | 16,000en |
| Profit | 16,000en - 3,200en | **12,800en** |
## Example 2:
Same calculation, but costs covered in USD with no JPY conversion:
### USDJPY=110:
| Description | Calculation | Amount |
|------------------------------------------|--------------------------------------|----------|
| Imported raw materials and energy (USD) | $20 | $20 |
| Sale price (USD) | $100 | $100 |
| Net in USD | $100 - $20 | $80 |
| Profit (JPY) | $80 * 110 | **8,800en** |
### USDJPY=160:
| Description | Calculation | Amount |
|------------------------------------------|--------------------------------------|----------|
| Imported raw materials and energy (USD) | $20 | $20 |
| Sale price (USD) | $100 | $100 |
| Net in USD | $100 - $20 | $80 |
| Profit (JPY) | $80 * 160 | **12,800en** |
It doesn't matter if you convert the USD cost of "imported raw materials and energy" to JPY or not, the end result is the same because the sale price is in USD.
# Including Japanese domestic raw materials and labor costs:
Now, if we include Japanese labor & other JPY-based costs in the calculation. Let's say our cost of manufacturing and domestic raw materials is 3000en for this widget, along with the $20 imported raw materials & energy, and the $100 selling price:
## Example 3:
### USDJPY=110:
| Description | Calculation | Amount |
|------------------------------------------|--------------------------------------|----------|
| Imported raw materials and energy (JPY) | $20 * 110 | 2,200en |
| Domestic costs (JPY) | 3,000en | 3,000en |
| Sale price (JPY) | $100 * 110 | 11,000en |
| Profit | 11,000en - 2,200en - 3,000en | **5,800en** |
### USDJPY=160:
| Description | Calculation | Amount |
|------------------------------------------|--------------------------------------|----------|
| Imported raw materials and energy (JPY) | $20 * 160 | 3,200en |
| Domestic costs (JPY) | 3,000en | 3,000en |
| Sale price (JPY) | $100 * 160 | 16,000en |
| Profit | 16,000en - 3,200en - 3,000en | **9,800en** |
## Example 4:
Now, we convert our JPY costs to USD to make clear that while USD-denominated "imported raw materials & energy" costs do not have any impact on exported goods costs, the weaker yen makes the cost of Japanese labor, and Japanese domestic sourced raw materials lower:
### USDJPY=110:
| Description | Calculation | Amount |
|------------------------------------------|--------------------------------------|----------|
| Imported raw materials and energy (USD) | $20 | $20 |
| Domestic costs (JPY) | 3,000en / 110 | $27.27 |
| Sale price (USD) | $100 | $100 |
| Net in USD | $100 - $20 - $27.27 | $52.73 |
| Profit (JPY) | $52.73 * 110 | **5,800en** |
### USDJPY=160:
| Description | Calculation | Amount |
|------------------------------------------|--------------------------------------|----------|
| Imported raw materials and energy (USD) | $20 | $20 |
| Domestic costs (JPY) | 3,000en / 160 | $18.75 |
| Sale price (USD) | $100 | $100 |
| Net in USD | $100 - $20 - $18.75 | $61.25 |
| Profit (JPY) | $61.25 * 160 | **9,800en** |
# Conclusion
For products that are **exported**:
1. The USDJPY rate does not impact the cost of "imported raw materials & energy", and does not cause the export price to rise.
2. The USDJPY rate has a direct impact on the cost of Japanese raw materials and labor. The weaker the USDJPY, the more competitive Japan becomes. Japanese exporters can either lower export prices or can reap higher profits in JPY terms.
They are not attempting to devalue the yen now but they sure have been for years now. It was even part of their asinine economic plan that Prime Minister Shinzo Abe thought of. “Abenomics" aimed to revive Japan's economy through three measures: monetary easing to devalue the yen, fiscal stimulus, and structural reforms. By devaluing the yen, the prime minister hoped to revive consumer spending by reversing consumer expectations of continually falling prices after years of stagnant-to-negative inflation.
Let me say that again here "revive consumer spending by making things more expensive for consumers." WTF?
He wanted the yen to get weaker and for us in Japan to pay more for goods. His idea was that the companies would raise wages to compensate for increased cost. SURPRISE they didn’t. And even if they did it was not enough.
Everything that is happening today was a result of their planning and is absolutely currency manipulation. Buying or selling its own currency in an attempt to manipulate it to their advantage is by definition considered currency manipulation. And Japan did nothing but print money and work hard for years in an attempt to devalue the yen to gain an advantage in its exports.
So, not trying to be condescending here, but it looks like you have a major misunderstanding as a result of just not understanding how fiscal and monetary policy works.
> Let me say that again here "revive consumer spending by making things more expensive for consumers." WTF?
What you are describing here is just how economics works. All advanced economies aim for about 2% inflation for this reason. To oversimplify, if people in an economy think their money will be more valuable a year from now than it is today, they are more likely to save rather than spend, which hurts the economy. They are also not likely to invest if they can get a return just by holding onto cash (look up the "Japanese Wall of Money"). That hurts the market. Debt also becomes harder to pay off, because money is more valuable, but your debt has a fixed principle and interest. All of these things have happened in Japan and are a major cause of the lost generation.
>He wanted the yen to get weaker and for us in Japan to pay more for goods.
These are 2 different things. "Weak Yen" is not the same as "Inflation" although they are closely correlated. As I stated in another post, the Yen is weak because Japan has *less* inflation than anywhere else. A weak yen makes imports more expensive, but about 85% of Japan's supply chains are entirely domestic, so even with the yen weakening by ~20% in the last year Japan's inflation remains below any of the other G7 countries with much higher rates. Energy costs are going up, but your ¥1000 salaryman lunch from 5 years ago is still siting pretty at ¥1000, whereas in the US a Big Mac combo now costs $18. The Strengthening of the Yen as a result of the Plaza Accords in the 80s was a major cause of the end of the Japanese economic miracle of the 50s-early 80s. Weakening the Yen helps the Japanese economy by (1) helping exports become more price-competitive in the global marketplace, (2) making domestically produced goods preferable for purchase, and (3) driving tourism.
So yeah, Abenomics wasn't asinine at all, it was and is basically the application of universally agreed upon economic policies believed to help Japan escape the decades of stagnation it has been languishing under, and it is finally looking like it might be bearing fruit.
Hi! As someone who is living in Japan and has loans in the US, can you explain how not doing anything is the correct move? I’m genuinely asking since I’m worried about when to send money over the the US
Correct for many aspects of the Japanese economy, but sucks for you. You aren't really the case discussed when the boffins at the BoJ sit in a smoky room deciding which levers to pull to keep the economy ticking.
Thank you for your response :p Ill just have to think abt how safe I feel on the trains here compared to New York to prevent me from focusing on my low valued yen 😓
They mean not doing anything is the right move for the BoJ (bank of Japan, their version of the federal reserve). Doing something might be the right move for you.
What is your situation? Living/earning in Japan but with debts in the USA?
Thank you for your response. I’m living and earning mainly in Japan with a tiny bit of freelancing in USD. I only have a tiny tiny school loan but I want to pay it off as soon as possible so I’m trying to pay $300-$500 a month
Unsolicited advice time: you'll never get a cheaper loan than your student loan so you don't really need to rush to pay it off. If the rate is around 3% paying the minimum and buying bonds with the rest of the money is more profitable.
The irony is that they are being put on the list even though the manipulation they engaged in would, in theory, work to reduce the trade surplus Japan enjoys by strengthening the yen relative to the dollar. I’m not an economist, but that’s my read.
At any rate, it sounds like this is just a formality and countries are added to the list once they pass certain thresholds, regardless of that countries intent, but I could be wrong about that as well.
As for “it [the intervention] led the yen to strengthen”, the BoJ intervened to scare off the currency speculators, but it doesn’t appear to be working.
This list doesn't accuse anyone of anything. There is a set list of criteria that leads to being put on a watch list. Being on the watch list means nothing, other than you meet the criteria. Japan was on the watch list for a long time up until a few years ago.
That's what I don't get either. Countries highly dependent on imports want a STRONGER national currency you fucking morons. Yes, even those that export for a living. Food and energy prices are already bad enough as it is. The US destabilizing the global economy with endless dollar printing during covid then accusing others of currency manipulation is plain insanity
>A country would meet all three if it had a trade surplus with the United States of at least $15 billion, a current account surplus of at least 3 percent of gross domestic product, and if it had engaged in persistent, one-sided intervention in foreign exchange markets.
I don't think Japan wants their yen exchange rate to be low intentionally. If the low yen causes more people to buy in USD, that is not really considered manipulation.
Japan is doing free printing now too, I forget what they call it, but I believe they just buy stocks with it.
I like it better than the American way of buying mortgage-backed securities to drive everyone's rent up...
Just printing money doesn't get you this designation, though. Every country in the world prints money when they want to.
Currency manipulation is specifically when you take actions to manipulate the exchange rate between your currency and USD to get an unfair advantage in international trade or manipulate your country's net income.
You can argue that the US meets that definition, but countries that have printed money into hyperinflation spirals for domestic reasons (Zimbabwe, for example) don't make the list.
How can Germany manipulate their currency too? Either you put the EU on the watch list or none at all…
It seems that 2 criteria for this watch list is about trade surplus, and not much about currency itself
>Curious why is USA always calling other countries of currency manipulation?
They're not, though. Only a few countries have ever been designated (currently *zero*), and this year's report concluded again that there isn't *any* manipulation happening.
The watchlist is just for countries that the Treasury thinks are a *risk* of engaging in manipulation due to ongoing economic factors.
“Without criticism, it mentioned that Japanese authorities intervened in foreign exchange markets in April and May for the first time since October 2022, in an attempt to deal with the yen's rapid depreciation against the U.S. dollar.” Isn’t the irony here that the BoJ intervention was to prevent further depreciation of the yen which would exacerbate the trade surplus imbalance? I imagine that’s a hard move to criticize.
This is difficult to understand, but doesn't the US accuse Japan of deliberately leading the yen to weaken? Therefore, it says there is no problem with this year's intervention because it led the yen to strengthen.
No, Japan is not attempting to weaken the yen. They're just not raising interest rates because they have far lower inflation than the rest of the developed world, which is causing the yen to weaken relative to the other countries (because capital flows towards high interest rate currency). The yen is weakening literally because they're doing nothing (which, by the way, is the correct move).
Kinda in a way of "maybe the economy doesn't add another 0 but groceries also doesn't?"
Everything, I mean everything, is 30-40% more expensive in the west just in the last 5 years.
Oh yeah I get it I'm from Chile, it was more of a question. For example here we always have eaten a lot of bread. 15 years ago, I used to go buy a kilo for around 1000 CLP. Nowadays is 2000/3000 depending on where and what bread (lots of options I guess?). 30-40 years ago we used to produce almost all wheat for internal use, nowadays is like 30% tho, so it's for various reasons.
Yep, just having a six figure salary doesn't even mean what it once meant. In fact, a six figure household income is just normal middle class now.
Here in the U.S. it’s crazy. Getting a stick of deodorant is like $10. A lot of it is corporate greed using inflation as an excuse to jack up prices while still having higher than ever profits. Tho funny enough, doing that shit has kinda lead to the big shoplifting problem we’re having. And shoplifting just causes stores to raise the prices even more + spend more money for anti-shoplifting measures.
Unless you live in the US, of course.
This is sarcasm?
No, It's reality. Real wages have outpaced inflation in the US. This isn't to say it isn't psychologically affecting to see higher prices on items and it certainly makes wage growth less impactful.
Only out of touch PMC liberals with fake email jobs believe this.
Only people who know what the CPI is believe this
ppl don't want to hear it, but you're exactly correct. Ezra Klein has spent a lot of time looking at this phenomenon lately.
Yeah I knew I'd be downvoted but idc, it's true
>The yen is weakening literally because they're doing nothing (which, by the way, is the correct move). Not when you are a net importer of oil and food… Japan’s cost of living crisis is going to exacerbate the weaker the yen gets.
You are correct that the weak yen does exacerbate those problems, and you nailed it that the energy costs are where Japanese are feeling it the most. But about 85% of Japan's supply chains are entirely domestic, so even with the yen weakening by what, 20% in the last year? Japan's inflation remains below any of the other G7 countries with much higher rates. Energy costs are going up, but the example I like to use is that your ¥1000 salaryman lunch from 5 years ago is still siting pretty at ¥1000, whereas in the US a Big Mac combo now costs *$18*. Consider Japan's inflation is at 2.5% right now, (which is not nothing) whereas the US's inflation was at **9%** at one point and has been above Japan's current rate for almost the entirety of the Biden presidency (since March of 2021). I use the US for comparison because they're the world's largest economy, and because I've lived in both the US an Japan over the last 4 years, but it's not limited to them. The EU's inflation rate peaked above **10%** and, like the US, remains above Japan's rate even now. Because these numbers are exponential, this means that both the dollar and the Euro have lost something like 30% of their purchasing power over the last 3.5 years, whereas the Yen has lost something like 9%. >Japan’s cost of living crisis is going to exacerbate the weaker the yen gets. Again, not to dismiss this, because it's fucking tough out there, but the fact is there is a cost of living crisis *everywhere in the world* right now, not just Japan. And of developed countries, Japan is arguably hit the least hard. Consider also that the Japanese real estate market is dominated by variable interest rate mortgages (approximately 70% of all Japanese mortgages are variable rate)- meaning an increase in interest rates from the BOJ increases the housing payment of 70% of Japanese homeowners, and makes buying a house less affordable for anyone who doesn't own one. So, in addition to generally slowing down the economy (which is what rates are supposed to do- they are literally just a way of tempering inflation by damaging the economy), there is a good reason to think that they might actually make things MORE expensive for the Japanese on average. Which, again, points to the idea that doing nothing is actually the correct move. And all of THAT is without mentioning the corresponding BENEFITS that the weak yen has on a manufacturing-based economy like Japan's, which /u/MoneyFunny6710 touched on briefly.
> meaning an increase in interest rates from the BOJ increases the housing payment of 70% of Japanese homeowners *Kind of*. Japanese variable rate mortgages place limits on how much the monthly payment can increase. The interest goes up, but the month to month payment doesn't move all that much. What happens instead is that the length of the loan gets longer. It still sucks, of course, but it isn't likely to cause a wave of bankruptcies or people not being able to feed themselves.
> Japanese real estate market is dominated by variable interest rate mortgages (approximately 70% of all Japanese mortgages are variable rate)- meaning an increase in interest rates from the BOJ increases the housing payment of 70% of Japanese homeowners In the UK this happened and not only did it increase the costs for homeowners, it also led to a 30-50% increase in rents due to buy-to-let mortgages increasing. Previously worked out that a buy-to-let on a standard £500k flat in London went from ~£625 to ~£1640 in mortgage payments so landlords tried to make that 1k back from the tenants.
Thanks, this was an excellent explainer
Isn't Japan one of the world's largest holders of reserve currency? I'm curious if Japan can just wait out the US's high interest rates
Thats the plan, however Japan is dumping lots of USD to prop up the yen. There is some conspiracy theories out there suggesting that Japan's intervention and J. Powells dovish tone are related. I even heard rumors that the last set of intervention confirms that BOJ, Tokyo, and the Fed were in communication and guided Tokyo on intervention. All rumors of course, but it basivally points to BOJ holding steady and hoping the Fed will lower rates in a soonish time frame. Also fun fact, Apple also announce one of the largest share of buy backs, exceeding the amount of money Japan used for intervention. Apple buy backs $100 bln, Japan intervention $23 Bln, Japan has about 1tln in reserves
Hmm I see, I do wonder if dump USD to prop yen with reserve but I wonder if Japan can replenish those reserves with exports. I know you said it's a conspiracy theory but it would be an interesting situation. 100 bln on buy backs? That's huge lol, but I bet investors are happy. It's also crazy a single company can move more money than a country's central bank in a single trade. But yeah, I haven't been following the US market for a while, last I checked a bunch of low mid-cap bank stocks were crashing and JPow was still increasing interest rates. And only APPL, TSLA, and NVDA were doing well. This was back during the spring-summer of 2023
Any idea if commercial real estate or corporate loans are under the same pressure if BOJ raises interest rates? I knew home mortgages were all variable rates, but no idea if corporate borrowing might be a bigger problem and possibly the main reason BOJ hasn't raised rates.
>Which, again, points to the idea that doing nothing is actually the correct move I honestly see Japan’s monetary policy management as a vacuous pit where there basically aren’t alternative options because the policy has been fucked up for more than 3 decades, hence there is “do nothing”. But in terms of fiscal policy, there’s a lot the Japanese government can actually do, but Kishida and the LDP are too brain dead to stop to consider doing.
Thank god Japan is good at doing nothing.
I read that Japan is actually benefiting from the weak yen, because it increases the export of the large Japanese companies, mostly the carmakers. And it has a positive effect on tourism, at least economically.
issue is japan imports alot of energy which is a massive pain both consumers and the industries here and for us foreigners here that has to visit the US or other western countries for family and etc we are hit hard by the inflation there, because everything is so much more expensive and the deprecating yen doesnt help
The import of energy & materials to produce products that are then exported does not matter. It's a wash. The cheap labor due to the weak yen is a huge benefit. However for anything sold domestically, the cheap yen drives up prices. *** **Edit:** The downvotes crack me up. When using imported materials to produce a product for export, the cost of the imported materials is covered by the foreign currency paying for the exports. Using exports to the US and USD as an example, oil, gas, iron, etc etc are all priced in USD. The end product is sold in USD. USD-USD. It cancels. It doesn't matter if the JPY is strong or the JPY is weak. Income in USD, expenses in USD. If the end product is being sold in Europe and the material & energy costs are in USD then the EURUSD rate is what matters because ultimately it is all being paid for with EUR, and the expenses are in USD.
It's not a bad point for consumable commodities but there's still a lag and going to be a drop in purchases if raw material cost increases lead to an increase in the export price due to sticker shock. People buying steel are going to but steel no matter what, but people looking at Pikachu plushes might change their mind and just not buy anything if the prices go up quickly.
Let's say a given widget sells for $100, and contains $20 worth of "imported energy & raw materials". # Ignoring Japanese domestic labor & material costs: We ignore the cost of labor and domestic materials in Japan and purely look at how the USDJPY impacts materials costs. ## Example 1: A given widget sells for $100, and contains $20 worth of "imported raw materials and energy". ### USDJPY=110: | Description | Calculation | Amount | |------------------------------------------|--------------------------------------|----------| | Imported raw materials and energy (JPY) | $20 * 110 | 2,200en | | Sale price (JPY) | $100 * 110 | 11,000en | | Profit | 11,000en - 2,200en | **8,800en** | ### USDJPY=160: | Description | Calculation | Amount | |------------------------------------------|--------------------------------------|----------| | Imported raw materials and energy (JPY) | $20 * 160 | 3,200en | | Sale price (JPY) | $100 * 160 | 16,000en | | Profit | 16,000en - 3,200en | **12,800en** | ## Example 2: Same calculation, but costs covered in USD with no JPY conversion: ### USDJPY=110: | Description | Calculation | Amount | |------------------------------------------|--------------------------------------|----------| | Imported raw materials and energy (USD) | $20 | $20 | | Sale price (USD) | $100 | $100 | | Net in USD | $100 - $20 | $80 | | Profit (JPY) | $80 * 110 | **8,800en** | ### USDJPY=160: | Description | Calculation | Amount | |------------------------------------------|--------------------------------------|----------| | Imported raw materials and energy (USD) | $20 | $20 | | Sale price (USD) | $100 | $100 | | Net in USD | $100 - $20 | $80 | | Profit (JPY) | $80 * 160 | **12,800en** | It doesn't matter if you convert the USD cost of "imported raw materials and energy" to JPY or not, the end result is the same because the sale price is in USD. # Including Japanese domestic raw materials and labor costs: Now, if we include Japanese labor & other JPY-based costs in the calculation. Let's say our cost of manufacturing and domestic raw materials is 3000en for this widget, along with the $20 imported raw materials & energy, and the $100 selling price: ## Example 3: ### USDJPY=110: | Description | Calculation | Amount | |------------------------------------------|--------------------------------------|----------| | Imported raw materials and energy (JPY) | $20 * 110 | 2,200en | | Domestic costs (JPY) | 3,000en | 3,000en | | Sale price (JPY) | $100 * 110 | 11,000en | | Profit | 11,000en - 2,200en - 3,000en | **5,800en** | ### USDJPY=160: | Description | Calculation | Amount | |------------------------------------------|--------------------------------------|----------| | Imported raw materials and energy (JPY) | $20 * 160 | 3,200en | | Domestic costs (JPY) | 3,000en | 3,000en | | Sale price (JPY) | $100 * 160 | 16,000en | | Profit | 16,000en - 3,200en - 3,000en | **9,800en** | ## Example 4: Now, we convert our JPY costs to USD to make clear that while USD-denominated "imported raw materials & energy" costs do not have any impact on exported goods costs, the weaker yen makes the cost of Japanese labor, and Japanese domestic sourced raw materials lower: ### USDJPY=110: | Description | Calculation | Amount | |------------------------------------------|--------------------------------------|----------| | Imported raw materials and energy (USD) | $20 | $20 | | Domestic costs (JPY) | 3,000en / 110 | $27.27 | | Sale price (USD) | $100 | $100 | | Net in USD | $100 - $20 - $27.27 | $52.73 | | Profit (JPY) | $52.73 * 110 | **5,800en** | ### USDJPY=160: | Description | Calculation | Amount | |------------------------------------------|--------------------------------------|----------| | Imported raw materials and energy (USD) | $20 | $20 | | Domestic costs (JPY) | 3,000en / 160 | $18.75 | | Sale price (USD) | $100 | $100 | | Net in USD | $100 - $20 - $18.75 | $61.25 | | Profit (JPY) | $61.25 * 160 | **9,800en** | # Conclusion For products that are **exported**: 1. The USDJPY rate does not impact the cost of "imported raw materials & energy", and does not cause the export price to rise. 2. The USDJPY rate has a direct impact on the cost of Japanese raw materials and labor. The weaker the USDJPY, the more competitive Japan becomes. Japanese exporters can either lower export prices or can reap higher profits in JPY terms.
They are not attempting to devalue the yen now but they sure have been for years now. It was even part of their asinine economic plan that Prime Minister Shinzo Abe thought of. “Abenomics" aimed to revive Japan's economy through three measures: monetary easing to devalue the yen, fiscal stimulus, and structural reforms. By devaluing the yen, the prime minister hoped to revive consumer spending by reversing consumer expectations of continually falling prices after years of stagnant-to-negative inflation. Let me say that again here "revive consumer spending by making things more expensive for consumers." WTF? He wanted the yen to get weaker and for us in Japan to pay more for goods. His idea was that the companies would raise wages to compensate for increased cost. SURPRISE they didn’t. And even if they did it was not enough. Everything that is happening today was a result of their planning and is absolutely currency manipulation. Buying or selling its own currency in an attempt to manipulate it to their advantage is by definition considered currency manipulation. And Japan did nothing but print money and work hard for years in an attempt to devalue the yen to gain an advantage in its exports.
So, not trying to be condescending here, but it looks like you have a major misunderstanding as a result of just not understanding how fiscal and monetary policy works. > Let me say that again here "revive consumer spending by making things more expensive for consumers." WTF? What you are describing here is just how economics works. All advanced economies aim for about 2% inflation for this reason. To oversimplify, if people in an economy think their money will be more valuable a year from now than it is today, they are more likely to save rather than spend, which hurts the economy. They are also not likely to invest if they can get a return just by holding onto cash (look up the "Japanese Wall of Money"). That hurts the market. Debt also becomes harder to pay off, because money is more valuable, but your debt has a fixed principle and interest. All of these things have happened in Japan and are a major cause of the lost generation. >He wanted the yen to get weaker and for us in Japan to pay more for goods. These are 2 different things. "Weak Yen" is not the same as "Inflation" although they are closely correlated. As I stated in another post, the Yen is weak because Japan has *less* inflation than anywhere else. A weak yen makes imports more expensive, but about 85% of Japan's supply chains are entirely domestic, so even with the yen weakening by ~20% in the last year Japan's inflation remains below any of the other G7 countries with much higher rates. Energy costs are going up, but your ¥1000 salaryman lunch from 5 years ago is still siting pretty at ¥1000, whereas in the US a Big Mac combo now costs $18. The Strengthening of the Yen as a result of the Plaza Accords in the 80s was a major cause of the end of the Japanese economic miracle of the 50s-early 80s. Weakening the Yen helps the Japanese economy by (1) helping exports become more price-competitive in the global marketplace, (2) making domestically produced goods preferable for purchase, and (3) driving tourism. So yeah, Abenomics wasn't asinine at all, it was and is basically the application of universally agreed upon economic policies believed to help Japan escape the decades of stagnation it has been languishing under, and it is finally looking like it might be bearing fruit.
Hi! As someone who is living in Japan and has loans in the US, can you explain how not doing anything is the correct move? I’m genuinely asking since I’m worried about when to send money over the the US
Correct for many aspects of the Japanese economy, but sucks for you. You aren't really the case discussed when the boffins at the BoJ sit in a smoky room deciding which levers to pull to keep the economy ticking.
Thank you for your response :p Ill just have to think abt how safe I feel on the trains here compared to New York to prevent me from focusing on my low valued yen 😓
They mean not doing anything is the right move for the BoJ (bank of Japan, their version of the federal reserve). Doing something might be the right move for you. What is your situation? Living/earning in Japan but with debts in the USA?
Thank you for your response. I’m living and earning mainly in Japan with a tiny bit of freelancing in USD. I only have a tiny tiny school loan but I want to pay it off as soon as possible so I’m trying to pay $300-$500 a month
Unsolicited advice time: you'll never get a cheaper loan than your student loan so you don't really need to rush to pay it off. If the rate is around 3% paying the minimum and buying bonds with the rest of the money is more profitable.
The irony is that they are being put on the list even though the manipulation they engaged in would, in theory, work to reduce the trade surplus Japan enjoys by strengthening the yen relative to the dollar. I’m not an economist, but that’s my read. At any rate, it sounds like this is just a formality and countries are added to the list once they pass certain thresholds, regardless of that countries intent, but I could be wrong about that as well. As for “it [the intervention] led the yen to strengthen”, the BoJ intervened to scare off the currency speculators, but it doesn’t appear to be working.
This list doesn't accuse anyone of anything. There is a set list of criteria that leads to being put on a watch list. Being on the watch list means nothing, other than you meet the criteria. Japan was on the watch list for a long time up until a few years ago.
That's what I don't get either. Countries highly dependent on imports want a STRONGER national currency you fucking morons. Yes, even those that export for a living. Food and energy prices are already bad enough as it is. The US destabilizing the global economy with endless dollar printing during covid then accusing others of currency manipulation is plain insanity
>A country would meet all three if it had a trade surplus with the United States of at least $15 billion, a current account surplus of at least 3 percent of gross domestic product, and if it had engaged in persistent, one-sided intervention in foreign exchange markets. I don't think Japan wants their yen exchange rate to be low intentionally. If the low yen causes more people to buy in USD, that is not really considered manipulation.
I thought the general consensus was govt wants low but not the locals.
Curious why is USA always calling other countries of currency manipulation? Who is to say the USA isn’t manipulating the dollar?
Which it definitely is. They just print dollars whenever needed.
Japan is doing free printing now too, I forget what they call it, but I believe they just buy stocks with it. I like it better than the American way of buying mortgage-backed securities to drive everyone's rent up...
It’s called Quantitative Easing but it’s not as simple as just freely printing money
I don't know what it's called in Japan I mean
Just printing money doesn't get you this designation, though. Every country in the world prints money when they want to. Currency manipulation is specifically when you take actions to manipulate the exchange rate between your currency and USD to get an unfair advantage in international trade or manipulate your country's net income. You can argue that the US meets that definition, but countries that have printed money into hyperinflation spirals for domestic reasons (Zimbabwe, for example) don't make the list.
How can Germany manipulate their currency too? Either you put the EU on the watch list or none at all… It seems that 2 criteria for this watch list is about trade surplus, and not much about currency itself
>Curious why is USA always calling other countries of currency manipulation? They're not, though. Only a few countries have ever been designated (currently *zero*), and this year's report concluded again that there isn't *any* manipulation happening. The watchlist is just for countries that the Treasury thinks are a *risk* of engaging in manipulation due to ongoing economic factors.
Because being the world reserve currency isn't manipulative...
Theres a long history too that, which begins around the end of WW2...
git gud
lol, the irony.
Lmao US shenanigans as usual
Nothing new
Why isn't the US itself in this watchlist?
BOJ has been intervening in the markets whenever the yen slips past 160
The pot calling the kettle black.