Japan’s Minister of Finance, Shunichi Kato, said Tuesday that he hopes that any conversation with US Treasury Secretary, Scott Besent, this week is based on this understanding of the currency market.
Outstanding comments
Bilateral meetings will be held with their counterparts at the G7 Finance Leaders meeting later this week.
I hope to discuss several issues, including the currency market, if I met with Besent out of the G7 meeting.
The impact of US fiscal and monetary policy will be examined on Japan’s economy, when asked about the reduction of US debt rating by Moody’s.
At the previous bilateral meeting with Besent, both parties confirmed that change rates must be established by markets and that excessive volatility in the currency market has an adverse impact on the economy.
I hope that any conversation with Besent this week is based on this understanding of the currency market.
Market reaction
At the time of writing, the USD/JPY torque is negotiating 0.08% lower in the day, quoting 144.75.
And in Japanese faqs
The Japanese Yen (JPY) is one of the most negotiated currencies in the world. Its value is determined in general by the march of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of the Japanese and American bonds or the feeling of risk among the operators, among other factors.
One of the mandates of the Bank of Japan is the currency control, so its movements are key to the YEN. The BOJ has intervened directly in the currency markets sometimes, generally to lower the value of YEN, although it abstains often due to the political concerns of its main commercial partners. The current ultralaxy monetary policy of the BOJ, based on mass stimuli to the economy, has caused the depreciation of the Yen in front of its main monetary peers. This process has been more recently exacerbated due to a growing divergence of policies between the Bank of Japan and other main central banks, which have chosen to abruptly increase interest rates to fight against inflation levels of decades.
The position of the Bank of Japan to maintain an ultralaxa monetary policy has caused an increase in political divergence with other central banks, particularly with the US Federal Reserve. This favors the expansion of the differential between the American and Japanese bonds to 10 years, which favors the dollar against Yen.
The Japanese Yen is usually considered a safe shelter investment. This means that in times of tension in markets, investors are more likely to put their money in the Japanese currency due to their supposed reliability and stability. In turbulent times, the Yen is likely to be revalued in front of other currencies in which it is considered more risky to invest.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
