New York

Institutional investors expect Japanese yen to appreciate against US dollar in new year

© Xinhua News Agency

Japan’s Sumitomo Mitsui DS Asset Management forecasts that the yen will gradually appreciate against the dollar this year, reaching a level of 129 yen by the end of the year.

TOKYO, Jan. 15 (Xinhua News Agency) — As the new year begins, the Japanese yen has been the center of attention in global financial markets, with local financial institutions predicting that the yen’s appreciation against the U.S. dollar could gradually accelerate this year. I predict there will be.

In 2022, a sharp depreciation of the yen’s exchange rate shocked the Japanese economy, with the currency depreciating more than 30% against the US dollar.

The yen’s weakness in 2022 was due to the US Federal Reserve’s multiple aggressive rate hikes since early last year, which also boosted the dollar against other currencies. In late October 2022, the yen-dollar exchange rate in the Tokyo foreign exchange market fell below ¥150, the lowest level since August 1990.

According to a report released by Mitsubishi UFJ Bank, Japan’s largest bank, the United States adopted a tightening monetary policy in response to high domestic inflation, with many central banks catching up with interest rate hikes.

However, weak domestic demand and a slow economic recovery forced the Bank of Japan (BOJ) or Japan’s central bank to stick to ultra-accommodative monetary policy, according to the report.

Amid soaring energy costs, Japan’s wholesale prices rose for the 21st straight month, hitting a record high in November. Central bank data showed the corporate goods price index rose 9.3% year-on-year to 118.5.

Analysts believe the weaker yen has exacerbated the negative impact on Japan’s economy from soaring international energy prices.

Hidetoshi Tashiro, chief economist at Japan’s Sigma Capital Co., said Japan is a big importer and the rapidly depreciating yen is driving up operating costs for companies.

“However, it is difficult for businesses to pass on higher costs downstream through price increases, many of which are squeezing the operating space of most businesses, and SMEs face the risk of bankruptcy,” he said. I was.

© Xinhua News Agency

Twenty-one bankruptcies reported in the first 10 months of 2022 were due to the yen’s depreciation, 19 of which were reported between August and October, according to a report by business database Teikoku Databank.

According to Teikoku Databank, the number of bankruptcies in Japan due to the weak yen is likely to exceed the 22 reported in 2019 and reach the highest level in five years for the whole of 2022.

As the impact of the rapid depreciation of the yen on the Japanese economy continues, yen movements at the beginning of the year are attracting worldwide attention.

After its December 20, 2022 monetary policy meeting, the Bank of Japan announced a shift to ultra-accommodative monetary policy, raising the yield on 10-year Japanese government bonds to 0.5% from its previous cap of 0.25%.

Following the decision, yields on newly issued 10-year government bonds, seen as a benchmark for long-term interest rates, briefly surged in the Japanese bond market.

The trajectory of the yen in 2023 will be determined by the monetary policies of the US Federal Reserve and the Bank of Japan, noted a report released by Japan’s Sumitomo Mitsui DS Asset Management.

The report predicts that the yen will gradually appreciate against the dollar this year, reaching a level of 129 yen by the end of the year.

The Meiji Yasuda Research Institute, a local think tank, predicted that the yen-dollar exchange rate would rise in the midst of fluctuations.

A long period of aggressive monetary tightening in the United States risks pushing the economy into recession, at which point financial market expectations of gradual Fed rate cuts will prevail, according to think tanks.

The BOJ, meanwhile, is likely to make further revisions to its monetary easing policy this year, he added.

https://www.bignewsnetwork.com/news/273371816/institutions-expect-stronger-japanese-yen-against-us-dollar-in-new-year?utm_source=feeds.bignewsnetwork.com&utm_medium=referral Institutional investors expect Japanese yen to appreciate against US dollar in new year

Back to top button