USDJPY continues rising; the Yen is surrendering. The Japanese Yen continues its free-fall against the USD. The current quote for the instrument is 125.65. The Yen hasn’t been able to act as a “safe haven” asset for a long time, although financial and capital markets remain very rough. So, what’s going on?
As a rule, the Yen was falling when investors switched to risky assets but the current situation is different. One may assume that they are re-assessing the current situation in the Japanese economy and its financial system. Possible results? For example, deterioration of the national debt-servicing capacity may lead to a serious debt crisis and the collapse of Japanese stock markets. The current ratio of debt to the GDP in Japan is 170%. The QE programme implemented by the Bank of Japan smooths the problem a little bit but doesn’t solve it completely.
Moreover, the negative interest rate in Japan makes it possible to speculate on rate differences, which can be clearly seen in cross rates. Both Australia and New Zealand have opportunities to raise their rates and are planning to do it later this year.
On the other hand, the weak Yen is good for exporters. But the problem is that Japan is becoming a global importer, mostly of energies and metals. In this case, the JPY rate decline makes the situation more complicated. The currency rate should stabilise trade indices but it doesn’t happen. So far, the fundamental background prevents the Yen from quick recovery. Of course, unless the monetary and debt policy change.