Tag: Japanese Yen

Top Fiat vs Gold in 2022: Focus on Inflation

Posted on by Aibek Burabayev

It is time for my traditional yearly post to find out which fiat could beat the conventional store of value this year.

Let us see below how you predicted the future back at the end of December 2021.

Poll Results

The U.S. dollar was again the favorite bet for many of you. The next choice was the British pound, likely because it finished second in 2021. Among the top three bets, the Canadian dollar was an interesting choice that could be justified by the previous top ranking.

This time I changed the list of currencies to include only the top 5 currencies based on real foreign exchange turnover according to the Bank for International Settlements as per the table below.

OTC Foreign Exchange Turnover By Currency

Source: Bank for International Settlements

The following top 5 fiat currencies are listed in the table above: U.S. dollar (USD), euro (EUR), Japanese yen (JPY), British pound (GBP) and Chinese yuan (CNY). Continue reading "Top Fiat vs Gold in 2022: Focus on Inflation" →

Where do you think USDJPY will go?

Posted on by Aibek Burabayev

The Japanese yen is the second largest component of the Dollar Index (DX). It occupies 13.6% of it.

The real interest rate differential is the main reason behind the current severe weakness of the yen. I have already visualized it for you in my earlier post in August.

The Bank of England (GBP, 3rd largest part of DX) and lately the European Central Bank (EUR, the largest component of DX) raised their interest rates significantly during the last meetings. The Bank of Japan (BOJ), the Japanese Central Bank has kept its negative rate of -0.1% since 2016. Moreover, it repeated that it would not hesitate to take extra easing measures if needed, falling out of a global wave of central banks tightening policy.

Why BOJ is so dovish? There are several reasons. One of them, the history of inflation as shown in the chart below.

JPN Interest Rate VS Inflation

Source: TradingView

Japan has had a chronic deflation since the 1990s after the asset bubble burst. We can see how short term spikes of inflation (orange line) into the positive territory were short-lived. The BOJ didn’t even touch the interest rate in spite of inflation that has soared to unseen levels of 3.7% in 2014. This time around, the inflation didn’t race to the same peak and as I wrote above, the BOJ thinks of an opposite – easing!

The BOJ governor Mr. Kuroda said in the summer “If we raise interest rates, the economy will move into a negative direction.” The Japanese Central Bank does not want to cause a recession as the economy is still fragile.

Maybe the next chart could clarify the logic of the BOJ. Continue reading "Where do you think USDJPY will go?" →

Nikkei 225: Follow The Trail

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor


Since the start of 2017, the Nikkei 225 has lagged in performance; with a 2.8% return since 2017 began, it lagged the S&P 500'S 2.8% RETURN, and it lagged its Asian peers, the Hang Sang and the South Korean KOSPI, which gained 16% and 16.7%, respectively, year to date. Despite all that lagging, however, the future trend for the Nikkei 225 might be the most promising. The reason? The BoJ’s monetary policy, and how it is trailing the performance of the Japanese economy.

BoJ Policy vs Reality

In a recent speech at the University of Oxford, Bank of Japan Governor Haruhiko Kuroda stressed that, despite the latest improvement in Japan’s economic performance, inflation (the rise in prices) is still far from the BoJ’s target of 2%. As the official statistic released from Japan’s statistic Bureau suggests, Kuroda is right. Japan’s headline inflation hit 0.4%, still persistently close to 0%. Add to that the risk of another sell-off in oil and the downside risk for Japanese inflation seems very present. Together, that makes it incumbent upon the Bank of Japan to keep its ultra-loose policy. Nonetheless, something about Japan’s official data doesn't add up. Continue reading "Nikkei 225: Follow The Trail" →

Japanese Yen Set for a Winter Sell?

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


The Japanese Yen is finally ready for another bearish wave, the kind that could drive the Dollar-Yen trade to retest the 2015 highs. At least, that is what the USD/JPY technical analysis suggests. According to the MACD Index, the selling momentum has weakened, and the pair is just resting above the 100 pivot, a key pivot for the pair. But the question is, are fundamentals ripe for another Yen selloff and a USD/JPY rally?

Weekly MarketClub Chart of USD/JPY

Yen is a Bond Play

As I often reiterate, the Japanese Yen is essentially a bond play. Over the past decade, Japan has been stuck in a long deflationary cycle of falling prices and less than 1% average growth in five years. Moreover, Japanese consumers, as well as Japanese corporations, have had an overwhelming desire to hoard mountains of cash which only exacerbates the stagnation of the Japanese economy. The combination of constant cash hoarding and deflation has created a very robust market for Japanese Government Bonds. The Japanese government has tried to balance the phenomenon by accumulating a jaw-dropping debt of 229% of GDP or roughly $9.5 Trillion, and by trying to spur growth. Instead of balance, however, it has made the Japanese Government Bond market so overwhelmingly large (compared to other sectors), that it essentially dominates the dynamics of the Yen. When demand for Japanese Government Bond rises so does demand for the Yen, and vice versa. Continue reading "Japanese Yen Set for a Winter Sell?" →

BoJ Ready for Helicopter Money?

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


Helicopter money, that’s the big talk in the past week. The term helicopter money refers to a case where the government hands out money to citizens and funds it through printed money. The last time helicopter money was relevant was back in 2009. That’s when Ben Bernanke, then Federal Reserve Chairman, literally opened up the printing press and poured massive amounts of liquidity into the bond market, in tandem with a massive fiscal stimulus plan from the US government. Now, investors are speculating that the BoJ is ready to unleash a similar move, in coordination with the Abe government. And with the BoJ monetary policy meeting scheduled for this Friday, investors have high hopes. Are these hopes in place?

Kuroda Vs. Abe

In the past several months, BoJ watchers have been routinely underwhelmed by the BoJ’s statements. The BoJ slashed deposit rates to -0.5% and increased its QE program to a whopping ¥80 Trillion. But since those two announcements deflation has returned, yields on Japanese Government Bonds plunged to record lows and Japan’s GDP growth marked a modest 0.1% annually. And still, no monetary bazookas have been announced. Continue reading "BoJ Ready for Helicopter Money?" →