Summary of Key Points
On July 30-31, the United States and Japan jointly intervened in the Japanese yen exchange rate, forcing the continuously depreciating yen to rise by 4%. However, the U.S. did not do this to help Japan; rather, it was out of fear that a large-scale sale of U.S. bonds by Japan due to the yen's depreciation could transfer economic risks back to the United States.
I. Why Did the Yen Depreciate So Much?
The depreciation of the yen was not sudden and was mainly caused by two factors:
1. Interest Rate Gap: Interest rates in the United States are currently very high (the Federal Reserve has raised them to over 5%), while interest rates in Japan are almost zero (to stimulate the economy). People want to exchange yen for dollars to earn higher interest, leading to an increase in the supply of yen and a corresponding decrease in its value.
2. Import Pressure: Japan relies heavily on imported energy (oil, natural gas), which it must pay for in dollars. With the depreciation of the yen, buying the same amount of energy costs more yen, driving up domestic prices and putting pressure on consumers and businesses.
II. How Did the U.S. and Japan Intervene in the Exchange Rate?
The intervention involved a coordinated effort by both central banks to buy yen and sell dollars.
For example, if many people were selling yen and buying dollars, the yen would decline due to excess supply. By entering the market and purchasing large amounts of yen (increasing demand) while simultaneously selling dollars (increasing supply), the central banks made the yen more valuable and the dollar less so, thereby raising the yen exchange rate by 4%.
III. Why Did the U.S. Get Involved Personally? It's Really Not to Help Japan
The U.S.'s motivation is clear: to prevent Japan from selling its U.S. bonds.
Japan is one of the largest foreign creditors of the United States, holding more than $1 trillion in U.S. debt. If the yen continued to depreciate, Japan might sell its bonds to convert them back into yen to stabilize its currency or alleviate domestic pressures. However, a large-scale sale of U.S. bonds would cause bond prices to fall and yields to rise, increasing the cost of borrowing for the U.S. government. Therefore, by helping to stabilize the yen, the U.S. is essentially protecting itself from a potential debt crisis.
IV. What Impact Does This Have on Us Ordinary People?
1. Higher Costs for Traveling/Studying in Japan: With the appreciation of the yen, more RMB is needed to exchange for the same amount of yen. For instance, what used to cost 5000 RMB to exchange for 100,000 yen might now cost 5200 RMB.
2. Increased Prices of Japanese Goods Imported Online: The prices of Japanese cosmetics, electronics, and baby products remain the same in yen, but they become more expensive when converted into RMB.
3. Short-Term Gains for Yen-Linked Investments: Those who have invested in yen-based financial products or funds might make a small profit from the appreciation. However, given that U.S. interest rates are still higher than Japanese rates, the yen may continue to depreciate in the long term.
V. What Will Happen Next?
In the short term, the yen is likely to stabilize, but long-term pressures remain: U.S. interest rates are not expected to fall immediately, and Japan is cautious about raising them (to avoid affecting its economy). Therefore, the U.S. and Japan may continue to monitor the exchange rate. If the yen depreciates significantly again, they might intervene again. The U.S.'s primary goal remains to prevent Japan from selling its U.S. bonds. For ordinary people, it's advisable to wait before traveling to Japan or consider stocking up on Japanese goods online for now.