Yen Gyrates Lower as Japan Goes for Weak Yen, Higher Government Bond Yields, but Moves Must Be Orderly

They will never hand full control over yields to the market.

By Wolf Richter for WOLF STREET.

The yen dropped to ¥151.92 per $1 earlier today, approaching within a hair the intraday low of October 2022, then rebounded sharply to 151.22, but then fell again to 151.72 at the moment.

Finance Minister Shunichi Suzuki said earlier today that the government would monitor the situation and respond appropriately. And that was the response. The chart show hourly increments:

That USD/JPY of 152 was a trigger mark today. There were about $1.25 billion in options contracts that expired at 10 a.m. ET today with a 152 strike price, according to Reuters. Another $2.2 billion will expire on Wednesday.

And the yen’s sharp but short-lived rebound against the dollar earlier today was not due to Bank of Japan intervention, but due to the options expiry, Marc Chandler, chief market strategist at Bannockburn Global Forex, told Reuters.

The plunge and gyrations of the yen started in September 2021, when the Fed communicated that it would begin tightening in reaction to inflation that had begun to rage. Until then, the yen traded at around ¥110 to the USD, and had been in that range for years.

By October 2022, as the yen was plunging chaotically toward the ¥150 range and threatened to blow through it, the duo of Finance Ministry and the Bank of Japan engineered large waves of selling dollar-denominated securities and buying yen to stop the decline – which worked, and the yen eventually rebounded some. But that didn’t last – and it’s back where it was, but this time, the duo just let it move:

Adios, international purchasing power.

An exchange rate of ¥151 to $1 means that consumers and businesses in Japan have lost roughly 27% of their purchasing power since 2021 with regards to imports, including foods and energy products, and with regards to foreign acquisitions and foreign travels. So Japanese consumers and businesses are going to shift spending back to Japan, and they’re paying a whole lot more for imports. That’s the purpose.

The Bank of Japan, the last central bank still clinging to a negative policy rate but now undertaking baby steps away from it, has pursued a well-communicated strategy of fueling inflation, and the government has been supporting those inflation efforts with subsidies and stimulus budgets.

And it seems the Japanese authorities are now angling for a permanently lower yen, perhaps in the ¥150 range or even lower, though they’re not allowed to communicate such plans because that would be considered currency manipulation. So it’s all a little delicate.

But the situation has to remain under control of the government and the BOJ. There must not be any currency chaos. And when things move too fast, they step in. But when things move slowly and orderly to the same place, they let it go.

Snail-paced exit from NIRP and Yield Curve Control.

Back in 2016, the Bank of Japan followed the European idiocy and cut its one-month policy rate into the negative, to -0.1%, and it’s still at that negative rate. But it has given indications that it will move away from its negative interest rate policy (NIRP).

In preparation, to avoid an inversion of the yield curve, it has loosened its Yield Curve Control in several steps. For years, with Yield Curve Control, the BOJ had locked down the 10-year yield at first below 0.10%, and then below 0.25%, by buying Japanese Government Bonds (JGBs) to defend those levels.

On December 20, 2022, it then raised the cap of the 10-year yield to 0.5%, which caused all kinds of gyrations, as you can see in the chart below.

This year, the BOJ raised the cap to 1.0%, and then in October it said that the 1.0% cap wasn’t a fixed cap anymore, but a loose “upper bound,” and the 10-year yield has been zigzagging toward that level, right now at 0.88%:

Keeping the yield curve steep while tightening.

Locking down the short-term policy rate into the negative still while allowing the long-term yields to rise has prevented the yield curve from inverting – a phenomenon that has occurred in the US and has spawned 18 months of incessant recession-mongering.

The Japanese yield curve, by contrast to the US yield curve, is fairly steep, as controlled as it is, with the short end at -0.2% (below the BOJ’s policy rate), the 1-year yield at -0.05%, the 2-year yield at 0.10%, the 5-year at 0.43%; the 10-year at 0.88%, the 20-year at 1.58%, the 30-year at 1.78%, and the 40-year at 1.86%.

No Love for Markets.

The Japanese authorities have never been believers in a true market for government bonds. The government and the BOJ will never allow markets to do their thing with Japanese government bond yields. They will always be more or less controlled. It’s just a question of how much control they exercise.

The BOJ holds over half of the JGBs out there, and big government institutions hold another big load. Other Japanese institutions that the government and the BOJ can lean on hold another big pile. There is not much of a market left.

Moody’s – which this weekend kept the US credit rating at triple-A, and only lowered its outlook for that Triple-A rating to negative (meaning, it may lower the rating in the future) – has long ago cut Japan’s credit rating to A1, four notches below the US rating (my cheat sheet of bond credit ratings). And it’s just decoration and doesn’t matter because there is no free market for Japanese government bonds.

The entire situation has to remain under control of the government and the BOJ: The pace of the destruction of the yen’s exchange rate, the pace of inflation, the pace of the rise in government bond yields, and the yield curve. There must not be any currency turmoil or yield turmoil. And when things move too fast, authorities step in. But we can see the shift in policies toward a lower yen and higher yields.

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  81 comments for “Yen Gyrates Lower as Japan Goes for Weak Yen, Higher Government Bond Yields, but Moves Must Be Orderly

  1. W says:

    This is most likely the long term solution for demographic decline and slow growth. Muddle along

  2. Jason b says:

    Interesting analysis. I would expect the yen go much more down (1$/500Y or so). It is still holding well against BOJ and the govt policies.

    I think one advantage of Japan is to have trade surplus, which may be supporting the yen. It is also a reserve currency, although at much lower pct than dollar and euro.

    But with the current condition and policies, I can’t understand why anybody ever holds their savings in yen.

    • gametv says:

      I’m not sure if I feel the article really fully explains the reasons for this long term drop. Japan has been fighting deflation for decades due to certain factors – an economy that is not dynamic, consumers who save rather than spend, an aging population – these factors have allowed the BOJ to buy up massive assets, including equities and bonds, without creating inflation or the type of go-go mal-investment that liquidity causes elsewhere. This is a highly unnatural economic situation.

      They are just now starting to see some inflation creep in, but we will need to see if it really catches fire. There are other factors in Japan, such as a very different break-down in the proportion of spending on different categories (rent, healthcare, education) than in the US. For example, with a national healthcare system, the government can hold inflation down in healthcare.

      Anyway, the drop in the currency pair is a result of interest rates rising everywhere else, but not in Japan. So the drop since 2021 wasnt really a change in Japanese policies, it was the rest of the world changing. So I am keeping an eye on whether we reach an inflection point where interest rates in the US are dropping while rates in Japan are rising (this might take a long time). My theory is that there is a lag effect with Japan, but this might not be correct. Just need to watch this.

      The bottom line for investors is that it is probably a good time to start to learn more about global investing, because large currency changes might have a big impact on future returns.

    • Sams says:

      Any country with a tade surplus is in the position to steer the exchange rate of their currency. They may or may not be able to, but in the case of Japan I do suspect that the change in exchange rate between Yen and US dollar is decided and executed.

  3. Mr Magoo says:

    At 150 yen to the US Dollar, seems like the Yen has fallen, and it has.

    If you look at a longer term chart 50 years, the Yen has been a lot weaker.

    1980 – 240 Yen to the US Dollar
    1970 – 350 Yen to the US Dollar

    In the 1970’s Japan became a powerhouse with Consumer Electronics and fuel efficient autos, Honda, Datsun, Mazda, and so on. The Yen strengthened a lot.

    In the late 1980’s Robert Rubin, Alan Greenspan, and Larry Summers convinced the Bank of Japan to lower interest rates and keep lowering rates to zero and beyond. Sadly, I did not believe it was possible to achieve negative interest rates.

    Understandably, I was never a fan of Larry Summers. I can understand why Harvard fired Larry Summers through a no-confidence vote.

    What will be the result of trying to normalize interest rates ?
    Currencies are no longer backed by gold or silver.
    Will huge deficits weigh on currencies ?

    I do not know……….I do not have a Crystal Ball.
    But I do like Wolf Street.

    • Einhal says:

      Harvard fired Larry Summers through a no-confidence vote, but not because of his insane macroeconomic policies. They did so because he dared offend the woke police by pointing out genetic differences between men and women.

    • longstreet says:

      “In the late 1980’s Robert Rubin, Alan Greenspan, and Larry Summers convinced the Bank of Japan …”

      Add Krugman to the list

  4. Herpderp says:

    How do you weaken a currency externally why avoiding inflation weakening it internally and negating the difference?

  5. Cas127 says:


    More articles on FX mkts/interest rates/CB printing like this one, please.

    Until pretty recently (pre 2004 or so), Americans had the luxury of ignoring just how easily their government (via printing and other macro manipulations) could reduce the value of their earnings/savings by silent/unvoted means.

    The US was the premier, unchallenged industrial power and therefore had less need of currency manipulation tools that other, less economically powerful nations repeatedly invoked (and more than once destroyed their economies with). This dynamic educated their populations (Germany, UK, Argentina, on and on) in a way that the US public wasn’t.

    But the days of US unipolar dominance are over (else why 20 years of ZIRP?) and the US public needs to understand a *lot* more about how real world intl trade and finance work.

    Otherwise, the DC shills will be perpetually telling us how “the Pound in our pocket is worth just as much” even as the USD is massively diluted and the dollar falls.

    That is not the case at the moment, but $32 trillion in debt, 50+ years of trade deficits, and an even longer unwillingness to face America’s evaporating competitiveness, make that outcome inevitable.

    DC is a one trick pony (dilution) and it is a bad trick.

    • Mike R. says:

      Great comment. Another way I look at it is America has been living way beyond its productive means. You can see this in all the “nice to have” things bought with “free money” from Washington.

      The rest of the world has been getting tired of supporting all of this; particularly as they see America’s “values” greatly shifting from their own.

      The coming storm surrounds commodoties and important manufactured items (like steel). Those countries supplying these things are no longer going to be satisfied with debased dollars in return.

  6. Cobalt Programmer says:

    1. Is that a relatively >10% increase in the bond yields in the last one year? Is that means, inflation is also relatively >10% which is a double digit inflation?
    2. In every country, not only in Japan, Government or Bank of the country controls the bonds? How QE of US FED is different from Japan’s Takakashi Yamanoto system?
    3. So, the cost of 1 noodles packet is approximately 30 yens? My God! Their salary might be in six figures then.
    4. The population of Japan is shrinking unlike US (also us).
    5. Japan and ECB’s rate policy is not idiocy because, they can have negative rates as they have positive trade balance with other countries. So, they always have more hard money.

    • Nyguy says:

      Look up salaries for common occupations in Japan. At least as of 5 years ago they were surprisingly low. Dentist and software engineer really stood out to me.

      • cas127 says:

        Where could we find this data?

        Info like this would put the long Japanese stagnation (presaging America’s?) into human perspective.

        If DC’s “fix” for its $32T+ debt/entitlement undersaving is decades of poor salaries for 150+ million and “regrettable” levels of inflation then better the public see what the true cost has been for Japan.

        I think it is a safe bet that the Japan of 2023 is a helluva lot less happy than the Japan of 1984.

        (So much for Keynesian “solutions” – Bridges to nowhere get you…nowhere).

    • OM says:

      5 – not correct. Japan has negative trade balance for years. So less other currencies from trade. But this is more or less offset by financial account surplus. Overall not bad at all.

    • John H. says:

      Which country still has hard money? I need to know and didn’t realize there were any…

      • John H. says:

        Or do you mean a commodity, Cobalt Programmer?

        • Cobalt Programmer says:

          Yen is sill a hard money. Euro and dollar also. Compare this to Indian currency. Technology and society wise these countries are better. Lot of people who say US is now a third world country has never been to a third world country (May be to tourist traps of mehico or thailand)

        • Sams says:

          Some have been to third world countries and the USA. There may be larger differences between third world countries than between some of them and the USA.

        • Escierto says:

          I have been to Mexico, Dominican Republic, Philippines, Colombia, and Uruguay. Yes, the US is a Third World country. I would go further to say it’s a Banana Republic on the verge of complete disintegration and anarchy. I do not believe it will exist by 2030.

        • John H. says:

          Not saying you’re wrong, Cobalt Programmer, because definitions change over time, and many macro-economists wants to think that the US dollar is Just fine. And for the short-term it is fine because every other currency is in even worse shape.

          But hard money is a term that has been used for decades. And it means something different than “good money” or Non-banana-republic money.
          This is from the first few paragraphs of Investopedia’s definition:
          “Hard money originally referred to the physical properties of metallic money, which, unlike paper currency, is made of hard substances. This is the origin of the colloquial English expression, “cold, hard cash.”

          “The distinction between “hard” metal coins and “soft” paper money was borne by the fact that metallic coins are solid, physical tokens with intrinsic economic value independent of their monetary status. Meanwhile, paper fiat currency only represents a promise to pay the bearer in physical money upon redemption.“

          None of the monies in use currently is a “hard money,” in the traditional sense — Not Yen, not the Euro, and certainly not the $US.

          Much to our mutual disadvantage, IMO.

  7. max says:

    “They will never hand full control over yields to the market.”

    they are never fully in charge — as long as people trust them — they will have control — once that trust is lost control ( authority) money will become worthless.

    process will start with cutting zeros from old money and introducing new.

    • Einhal says:

      Yes, and the bitter lessons of history show that you don’t get a lot of warning when it’s about to happen. The infamous Weimar inflation started in 1921 and 1922, but mostly took place in 1923.

    • eg says:

      Their money will not “become worthless” as long as they can enforce tax collection in it — that’s what gives fiat currencies “value” and why citizens want to hold it as savings.

      That’s the only “belief” required — that the tax collector WILL come, only accepting their currency to extinguish taxes, fees and fines, and that the government will exercise its monopoly over the legitimate use of force to enforce tax collection.

  8. rojogrande says:

    Thank you for the update on Japan Wolf. I was sorry to read these articles don’t get many views. Coincidentally, I was looking at a 5-yr USD-JPY chart this weekend, the start of the spike down in the value of the Yen coincided with the first Fed raise in March 2022. You can see the spike on the graph in this article towards the beginning of 2022. If the policy rates of other central banks stay higher for longer and Japan insists on YCC and NIRP, or something close to it, the continued decline of the Yen seems inevitable. I also wonder if the Japanese government will ever lose control of some part of this.

  9. Cody says:

    What of the Japanese government’s holding of US treasuries?

    Surly that should come into play if there is an effort to defend the value of the yen.

    • Wolf Richter says:

      Yes, it has come into play. Their holdings dropped in the second half of 2022 when they were defending the yen. Now they’re no longer defending as long as the drop is slow enough.

      Here is an updated chart with China, Japan, and total foreign holders:

      • C says:

        Is the decline in the value of securities held by Japan caused by the the rise in US interest rates rather than outright selling? If they were forced to mark to market how large would their loss be?

        Thank you,

      • Iws says:

        Wolf –
        So they are further out on gangplank than us. I know they have a higher savings rate, etc. But still a quasi comp to US as a major economy, aging pop etc.

        But… since they are along the journey to crazy town, what some possible outcomes in the next 5-15 years as debt to GDP heads above 200% (where we are tracking).

        If the Yen (or Dollar) crashes how might it play out?


  10. Harvey says:

    Seems like the perfect opportunity to take a vacation to Kyoto.

    • Z33 says:

      I came back from vacation in Japan less than two weeks ago. Amazing exchange rate for all I did there. Timing worked out great. Saw lots of other American tourists, too.

    • rojogrande says:

      LOL, the side ad on my screen next to these comments is for Japan Rail and says “See the beauty of Kyoto.”

    • Hubberts Curve says:

      But it is not a good time for those benefiting from Japanese Tourism. My wife and I were recently on the Big Island ( Hawaii) and the Japanese tourists seemed to have disappeared. Last time we were there ( 2018) the wide body jets, straight from Japan, were lined up in the little Kona airport.
      But this time there were none to be seen. I went to the shopping mall next to our hotel in a resort area, mostly filled with expensive vacation homes condo’s and golf courses and it was empty. I mean empty, with all stores closed down ( touristy shops) for a juice shop and the Tommy Bahama. I went in to the Tommy Bahama to get a new pair of shorts and asked the salesperson what happened. She said that once the travel restrictions were lifted ( last year) the Japanese tourists never came back due to the exchange rate.

  11. Debt-Free-Bubba says:

    Howdy Folks. Live by the ZIRP, die by the ZIRP.

  12. James says:

    The older Japanese seem to be very aware of the loss of purchasing power and are buying gold bullion to preserve their purchasing power. The price of gold is up 20% in the last 2 years.

    Compare that with the increase in gold in US dollars.

    Of course Mrs. Watanabe (the housewife) are astute observers of inflation.
    But the younger generation seem to be oblivious to the sea change taking place in NIRP and YCC.

    Not sure how they are responding to this?

    I do know (as I’m back in Nippon visiting my wife for 6 months) that
    if you bring Gold into Japan not only is there a limit but if you try to sell it you will have to have paid a 10% consumption tax! Ouch.

    • Wolf Richter says:

      The reason why the price of gold denominated in yen is up is because the yen is down. The yen dropped 27% since 2021.

      Yes, if Japanese people hold gold or dollar-denominated investments, they would have preserved some of their purchasing power overseas. And many do hold those.

  13. Gunther says:

    The interest differential seems to invite a new carry trade.
    Borrow cheaply in yen and buy higher yielding US paper but It does not show in the Data.
    Thank you Wolf for showing the graphs in the comments.

    Could the trade be that “someone” borrows yen for nothing and buys the few stocks that go up? A falling yen would make the trade more attractive.
    Is that a source of the liquidity?

    • Wolf Richter says:

      “Could the trade be that “someone” borrows yen for nothing and buys the few stocks that go up?”

      1. If you want to buy now: A lower yen makes buying US stocks today more expensive than they were 2 years ago (buy high). For that to work out (assuming stocks stay flat), the yen would have to drop even more. But if stocks fall and the yen rises, you’re up shit creek because you lose on both ends, and you will not get as many yen back as you borrowed, and you’ll have to ask for a bailout.

      2. But if you bought US stocks in 2021 with the higher yen (converted ¥110 to $1, buy $1 worth of stocks), and if you’re now selling this $1 of stocks, you will get ¥151 yen back (assuming stocks stayed flat). For people in Japan with yen-income and yen-expenses, that would have been a very good trade.

  14. MM says:

    Thanks for the Japan update Wolf.

    Is there a practical limit to how much of the JGB market the BOJ can own? I wasn’t aware of the cultural aspect re the BOJ not wanting the market to set rates.

    • eg says:

      I believe the technical answer is that a central bank never needs to sell bonds — theoretically they could hold them all.

      I suspect, however, that this would have implications for their capital markets, though I am not as sure what those might be.

  15. andy says:

    Thinking of buying few Yens for when I travel to Japan. Not sure how to go about it just yet. Maybe Yen triple-bull ETF or somerhing. Probably need to read Wolf’s book about Japan adventures.

  16. Ponko says:



  17. James says:

    You can buy Yen with a US credit or debit card easily at most MUFG (Mitsubishi Banks) @ their “INTERNATIONAL ATM 50,000 Yen max x 3 =
    about $1,000 USD per day.

    • andy says:

      Thanks James, I will check it out.
      Japan’s finance minister just resigned. Let’s see if yen can hit 155-160.

      • Wolf Richter says:

        No wait….”Deputy” Finance Minister Kenji Kanda resigned over a tax scandal.

        Finance Minister Shunichi Suzuki is still in office and is monitoring the situation, LOL

  18. Harrold says:

    It sounds like you are saying the gov’t deficit spends, but then buys up almost all of it’s debt. That should mean there is no inflation. Am I missing something?

    • Wolf Richter says:

      “Am I missing something?”


      1. The government deficit-spends and issues the debt, but does NOT buy up any of the debt.

      2. The BOY creates money and buys up the debt with it.

      3. so no there’s plenty of inflation.

      • eg says:

        If I understand BOJ policy over the last few decades correctly they’ve been TRYING to generate more inflation in order to avoid deflationary forces in their economy, isn’t that right?

        • Wolf Richter says:

          They SAID so. But they say a lot of things to cover up something else. Riding this deflation mantra has allowed them to monetize a huge amount of government deficit spending, which would have had to stop had there been a lot of inflation. If you keep saying that we’re fighting deflation, people begin to believe in deflation, which stops price increases, and wage increases, and then what they got was two decades of no inflation and no deflation but true price stability, where periods of mild inflation were followed by periods of mild deflation, and the price index remained largely flat for two decades, amid the biggest deficit monetization ever, which was kind of a miracle that they could pull that off.

  19. John H. says:

    Four questions come to mind reading this article:
    1. What is the federal deficit situation in Japan, and is it gyrating higher, with ever increasing debt/GDP, as in the US?

    2. I understand that the individual (older) Japanese have a strong saving mentality. Does that carry through to central bankers? I’m guessing “no,” but just guessing.

    3. What is the current state and vector of Japanese bank reserves and finance?

    4. Does Japanese finance infrastructure include “canton” style element that is problematic, as in China?

    Thanks in advance for any comments.

  20. LordSunbeamTheThird says:

    hmm the fascinating yen. No idea but my Japanese wife tells me that butter went up and i checked its three times UK price. I also had a look at Kensington Trackball and Nobo Kia, both are almost half price compared to the UK so there hasn’t been that much price imports (yes I know its not a survey).
    Japan domestic inflation doesn’t have the same price signalling as the west because for e.g health care insurance the system is that you pay a token amount and the government insurance covers the rest i.e prices are set by the government. And for food also the Japan Agricultural group forgot the name is incredibly powerful and enables the tiny smal holdings to continue to exist by essentially forcing prices for food up, food is extremely expensive in Japan.
    One price held down and the other up.

    Having said that the yen is absurdly cheap already, ludicrously cheap, and wages in Japan are insanely low. But still no major lurches and everybody continues to look on in amazement. My programming salary in Japan was the same as a minimum wage job in the UK except without free health care (such as it is) and 28 days holiday. How can it go on!!!!

  21. Einhal says:

    Looks like inflation is defeated, and Fed can return to ZIRP as soon as January or February! Merry Christmas everyone!

    • Wolf Richter says:

      Patiently wait for the CPI article, LOL

      • Einhal says:

        I’ll read it tonight while drinking a Voodoo Ranger!

        • Fed up says:

          I love voodoo ranger. I need several after this B S move today in stonks. So sick of it. Yields tanking. That’s all we need.

        • ru82 says:

          @FED Up – Did you notice all stocks related to housing are is around 10% or higher?

          Home Builders, Zillow +12%, Home Depot +18%. Banking KRE +8%.


        • Fed Up says:


          Pisses me off. 😡

        • Einhal says:

          ru82, pisses me off too, as it means that all of the supposed “hard work” done to reduce inflation will dissipate.

          In a lot of ways, the markets are “celebrating” the same thing. The last few weeks have been based on rate hikes being done. But then today’s CPI report is being celebrated because it’ll mean rate hikes are done.

          Isn’t that supposedly already “baked?”

        • ru82 says:

          @Einhal – Yes, rate hikes might be done. Maybe they are not needed anymore if inflation is in check and we can stay at a rate that is normal? The stock market is up today but remember, if you take out 7 or 8 stocks out of the SP500, the other 492 stocks have been flat.

          1) It looks like treasury yields dropped today on the low CPI. I am 90% sitting in money markets earning 5%. If that starts to drop, I will be look to buy stocks and move out of MM funds. I am sure there are many like me. There has been a flow out of Stock ETFs into Bond ETFs this year. But will a lower CPI and rising stock market cause this to reverse. That could driver the stock market higher?

          2) But the Government has almost 10 trillion treasuries it needs to sell over the next year. I will not be a buyer if they are selling lower that 4%. Maybe others will believing they can buy 4.5% treasuries now and sell a year later when treasuries are at 3%.

          I would think with 10 trillion in treasuries needing to be sold over the next year would cause Treasury rates to go up?

          I am just trying to figure this out. I did notice my Apple news subscription just went from 9.99 to 12.99. This is a service and is Apple just behind the game and playing catchup or is service inflation done?

    • ru82 says:

      We have to give the Fed some credit. Lots of people bashed them as inflation was dropping. A year ago everyone was worried about run away inflation.

      I think no ZIRP in the future, but we are getting closer back to normal. We have to give the FED a little credit. They are trying to keep inflation down despite crazy spending of the government.

      -Hopefully 3.5 to 4.5% fed fund rate: Savers can actually make a decent no risk return on CDs at 4%.
      – 6.5% to 7.5% mortgage rates: Banks will actually make home loans and can make a profit. The GSE do not have to be the only entity giving out loans.
      -8% Stock Market returns
      -Housing prices stabilize. Maybe they drift lower or stay flat for a few years as wages catch up.
      – Commodity prices have seemed to have stabilized over the past 6 months.

  22. jimbobjoe says:

    Japans national debt is 3x gdp.
    At what point does this massive debt load affect japans interest rates in a meaningful way?
    4x, or 5x gdp?
    since japans government clearly controls its own interest rates, by purchasing its debt, just like we did for years, which is intended for price discovery, why does japan even have elections? My point is this, if they are going to act like a banana republic, why not make it official?
    If you are a dog, you are a dog.
    Please help me out here.

  23. Tony says:

    Core “transitory” inflation is still over 4% and you want us to give the Fed some credit ha ha ha I will have whatever it is you are smoking

  24. Glen says:

    Japans election system is not that dissimilar from the US although there are obvious differences such as prime minister nominated by the national legislature.
    Not clear how they would resemble a banana republic although that term is thrown around fairly broadly. Certainly financial choices governments make can catch up with them.

    • 91B20 1stCav (AUS) says:

      Glen – my observation over the decades has been that ‘banana republics’ are usually falling into the hands of a military junta (…the main concern of the MacArthur Doctrine’s drafters for postwar Japan when examining how the world came to that sorry pass…).

      may we all find a better day.

  25. David in Texas says:


    Do you have a sense for the size of the Yen carry trade? Your post today points to this continuing to be hugely profitable for those able to borrow billions of Yen at zero percent (i.e, not us ordinary mortals).

    But if the yen ever rips the other way, a lot of levered players will be in a world of hurt. The question is whether the carry trade is big enough (or interconnected enough) to bring down the financial system like the 2007-08 mortgage meltdown?

    I suspect – given both the opacity and the profits involved – that the answer is probably “yes,” but I don’t have any hard evidence for this. Just a suspicion that enough people have made so much money for so long that they no longer take proper account of the risks.

  26. BS ini says:

    Looks like this Yen article had some hits but no that won’t draw a big crowd for the reading audiences but I move them . Thanks for the updates .

    • Wolf Richter says:

      The number of comments and the number of hits are not connected. Sometimes, articles that don’t get read much stir up a lot of comments, from 200 people arguing back and forth until there are 500 comments. Sometimes, articles don’t inspire commenters but get a huge number of readers.

      But this was one of the least-read articles in a while — which is typical for Japan articles. It might eventually squeak over 6,000 reads.

      • eg says:

        I certainly value them, as I do all of the Canadian and European ones — they help provide additional context with which to better understand the US ones, thanks.

  27. Mike G says:

    I just got back from a trip to Japan and the exchange rate is a huge gift to foreign tourists right now, almost everything from restaurants to hotels is startlingly inexpensive compared to the US.

  28. Banzai says:

    Japan is peculiar in the sense that small commerce does what appears to be magic in order to cut expenses and keep prices low. Whatever the economy throws on them, you can still eat your full for less than 5CAD or have a filling bowl of ramen for 8-9CAD. To top it all, there are not tips added to the bill.
    Wherever you go, there are small manufacturers and companies actually making stuff. People take pride in good craftsmanship and a job well done and such a thing is taken for granted by the Japanese people.
    Service is impeccable. A 10-year full warranty on kitchen appliances is the norm. I can go on with the list, but the point I want to make is that stats don’t come even close to covering the real situation.
    What would save Japan is further depreciation of the yen, dropping all sanctions and aligning themselves globally according their national interests, stay away from adopting Western based immigration policies. don’t forget, although they do not advertise it, Japan is major donor of funds and know-how around the world. I am not sure that any of the current political parties is capable of achieving this.

  29. BeeKeeper says:

    ok, this is the last time I post correction on BOJ here.

    “the duo of Finance Ministry and the Bank of Japan engineered large waves of selling dollar-denominated securities and buying yen”

    For some unknown reason, every time you try to frame BOJ as culprit of interventions.

    Again, interventions are ONLY and ONLY run by Ministry of Finance (MoF) (as you mentioned).
    BOJ is just the broker in the transactions. BOJ just executes orders as a service to the MoF and nothing else, they DO NOT ENGINEER anything, all interventions are engineered ONLY by MoF.

    It’s the same if you buy some security through broker, the broker does not engineer anything, your broker just executes your order and takes some fee/spread on a transaction as a service provider, that’s it.

  30. ChrisFromGA says:

    Thanks, Wolf!

    There is a burning hypothetical question in my mind, which is, if Japan can get away with cornering their own government bond market, couldn’t the Fed do the same?

    I’ve had an internal dialogue with myself about this, and the best argument I can come up with against the affirmative answer is that the Yen is not a global reserve currency. If the Fed were to corner the US treasury market and end up owning >50% then something very bad would happen to the dollar.

    Foreign governments would stop buying treasuries and then the intellectual laziness takes over … I can’t get past this step.

    But my hunch is that all the dollar doomsayers might finally get their moment in the sun if the Fed did such a thing as the JCB.

    A very

    • Wolf Richter says:

      We got a huge bout of inflation, and that stopped all that. Japan has a bunch of inflation too now. So they all got away with it for a long time.

      The Fed actually wants a lively market for Treasuries since they’re used so broadly as collateral and underpin so many things globally, so killing that market would be very bad.

  31. ChrisFromGA says:

    Sorry for the cutoff sentence. A very happy Thanksgiving to you and your readers!

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