{"id":1650119,"date":"2022-09-21T03:08:21","date_gmt":"2022-09-21T07:08:21","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1650119"},"modified":"2022-09-21T03:09:30","modified_gmt":"2022-09-21T07:09:30","slug":"analysis-a-quadrillion-reasons-the-bank-of-japan-should-fret-about-fed","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/analysis-a-quadrillion-reasons-the-bank-of-japan-should-fret-about-fed\/","title":{"rendered":"Analysis-A quadrillion reasons the Bank of Japan should fret about Fed"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">22<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fanalysis-a-quadrillion-reasons-the-bank-of-japan-should-fret-about-fed%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1650119&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p>By Kevin Buckland and Vidya Ranganathan<\/p>\n<p>SINGAPORE (Reuters) \u2013     A quadrillion yen is lying idle with Japanese households, ready to be shipped overseas when yields abroad turn more attractive, and that moment could arrive as soon as this week.<\/p>\n<p>Later on Wednesday, the Federal Reserve will be raising rates again and by as much as a full percentage point. The following day, the Bank of Japan is certain to cement its standing as the lone global dove in developed markets by sticking to its negative rates. <\/p>\n<p>The difference in yields between the two markets will hit 300 basis points (bps): an inflection point that analysts say will prompt Mrs Watanabe, a moniker for the famed Japanese retail trader, to ditch the yen and move money out.<\/p>\n<p>\u201cIn terms of pure FX carry, the dollar will soon provide 3%, yen is still 0%, so that\u2019s a big difference,\u201d says Shusuke Yamada, chief forex and rates strategist at Bank of America in Tokyo. Those kind of yields are incentive for both institutional and retail investors to buy U.S. dollars and hold them, he says.<\/p>\n<p>\u201cJapanese households have a thousand trillion in yen deposits. I don\u2019t think it\u2019s going to move 1% a year, but even 0.1% is already one trillion, so even a small portion could have a meaningful impact. There is that potential,\u201d says Yamada.<\/p>\n<p>The blow to the already battered yen, that\u2019s down 20 percent versus the dollar this year, should be cause for concern for the Bank of Japan. <\/p>\n<p>Yield-seeking Japanese households have been notable absentees from global currency markets during the pandemic years as central banks pushed rates towards zero, squishing spreads between currencies and killing the pervasive yen-funded \u201ccarry\u201d trade.<\/p>\n<p>But household savings have been building up in the world\u2019s largest creditor nation. As of June, households had 1,102 trillion yen ($7.7 trillion) in cash and deposits, while private non-financial companies had 325 trillion yen.<\/p>\n<p>\u201cThere is a risk of what I call capital flight by Japanese households,\u201d said Tohru Sasaki, head of Japan markets research at J.P. Morgan Securities in Tokyo.<\/p>\n<p>\u201cWe have been talking about that for a long time \u2013 actually more than a decade \u2013 but it never happened. But I think the current situation is really different.<\/p>\n<p>\u201cThe generation is shifting, technology is improving, and Japan\u2019s situation is getting worse, so the possibility is getting higher of seeing a kind of capital flight.\u201d<\/p>\n<p>\u201cGETTING SCARY\u201d<\/p>\n<p>Citi\u2019s quant strategist Alex Saunders says carry trades in major currencies hadn\u2019t worked since 2008 as all rates converged to zero, and while they had revived this year, he hadn\u2019t seen much of that happening in the yen.<\/p>\n<p>That could be changing. Sasaki points to the more rooted feeling among Japanese that they have been gradually losing purchasing power with such a weak currency, but also to how easy it has become even for the elderly to buy foreign currencies with a smartphone.<\/p>\n<p>He also highlighted recent developments such as the swift oil-driven widening in Japan\u2019s trade balance to a record deficit, and the yen\u2019s unprecedented weakness in real terms.<\/p>\n<p>\u201cAnd now yields start widening, and people start shifting their money abroad gradually. Basically whatever the level, there is a feeling that we need to hold some foreign currency, or that we need to hold dollars, to avoid the risk of a weak yen,\u201d said Sasaki.  <\/p>\n<p>\u201cThat\u2019s why I\u2019m getting a little bit scared watching this. This time could be different \u2026 so it\u2019s dangerous.\u201d<\/p>\n<p>At 300 bps, the \u201ccarry\u201d on dollars funded by yen approaches levels last seen in the 2005-2007 bout of frenzied overseas investment by Japanese retail traders, and before that in 1996-1998. Anything less wouldn\u2019t compensate for the risks, although a weakening yen is a bonus.<\/p>\n<p>In January 2006, when spreads between U.S. and Japan were at their widest at roughly 440 bps, Japanese households had 1,631 trillion yen of assets. By June, that had shrunk by 22.5 trillion yen. <\/p>\n<p>\u201cEven if the FX rate doesn\u2019t change, if you have this kind of yield spread, you\u2019re going to reap a benefit,\u201d said Takuya Kanda, head of the research department at Gaitame.com Research Institute, which serves mainly retail investors.<\/p>\n<p>\u201cSo this week particularly, when the BOJ looks set to keep interest rates at extremely low levels, and really it\u2019s only Japan now that still has negative interest rates, that is a very conducive environment for money to flow overseas.\u201d<\/p>\n<p>In a survey of Gaitame.com clients on Aug. 23, about 60% said dollar-yen will continue to climb, and many forecast a rise to 145, he said. On Wednesday, it was just off 144.<\/p>\n<p>Bart Wakabayashi, branch manager at State Street in Tokyo, says typical retail Japanese traders like to roll over yen-funded foreign currency holdings every day to earn interest but also sometimes play for FX gains, making them far more willing to take on risks that institutions can\u2019t.<\/p>\n<p>That makes it imperative the BOJ tries to stamp out speculation the yen is a one-way downhill bet, which it has with statements and monitoring of yen levels.<\/p>\n<p>\u201cThe Bank of Japan is trying to change the conversation. People are saying 145 is the line in the sand. I don\u2019t believe that,\u201d said Wakabayashi. <\/p>\n<p>\u201cI think 150 is the line. I think 145 is the trigger that we go from stage 2, which is the official comments, to stage 3, which is the severe warnings.\u201d   <\/p>\n<p> (Editing by Kim Coghill)<\/p>\n<p><a href=\"https:\/\/www.oann.com\/analysis-a-quadrillion-reasons-the\/illustration-picture-of-japanese-yen-and-u-s-dollar-banknotes-3\/\"><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/09\/tagreuters.com2022binary_LYNXMPEI8K07E-BASEIMAGE.jpg\" alt=\"tagreuters.com2022binary_LYNXMPEI8K07E-BASEIMAGE\" \/><\/a><\/p>\n<p><a href=\"https:\/\/www.oann.com\/analysis-a-quadrillion-reasons-the\/file-photo-people-buy-their-lunches-from-street-vendors-in-3\/\"><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/09\/tagreuters.com2022binary_LYNXMPEI8K07I-BASEIMAGE.jpg\" alt=\"tagreuters.com2022binary_LYNXMPEI8K07I-BASEIMAGE\" \/><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Kevin Buckland and Vidya Ranganathan SINGAPORE (Reuters) \u2013 A quadrillion yen is lying idle with Japanese households, ready to be shipped overseas when yields abroad turn more attractive, and<\/p>\n","protected":false},"author":66,"featured_media":1889094,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1650119","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","fifu_finder_url":"https:\/\/www.oann.com\/analysis-a-quadrillion-reasons-the\/?utm_source=rss&utm_medium=rss&utm_campaign=analysis-a-quadrillion-reasons-the","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1650119","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/66"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1650119"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1650119\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1889094"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1650119"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1650119"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1650119"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}