Do you know why the Japanese yen appreciates (becomes stronger) when the global economy worsens?
As listed below,When a depression occurs overseasor,When a natural disaster occurs in JapanalsoYen appreciationIt became so.
- During the Lehman Shock (2008)
- Great East Japan Earthquake (major natural disaster)
- The COVID-19 shock of 2020
However, Japan's GDP has remained completely unchanged for over 30 years, and the Bank of Japan's Tankan survey (which measures the trend in business conditions) has not improved at all.Why did the yen appreciate despite the recession?Is that so?
This article explains the reason.
Japan is the world's largest creditor nation.
This is because Japan is the world's largest creditor nation (i.e., it has a large net external asset balance).
In other words,Japan lends money and invests overseas, so there is a large amount of Japanese assets overseas.Therefore,Japan will reclaim its large amount of assets lent out overseas if the economy deteriorates.You can.
When a natural disaster (like the Great East Japan Earthquake) occurs...
In Japan
In order to recover from the devastating damage caused by natural disasters,Because we will run out of money, we will need to sell our overseas assets and bring the money back to Japan.
For example, when an insurance company pays out insurance money in the event of a disaster, it uses assets held overseas (i.e., dollar-denominated stocks and bonds)If you sell it overseas, you'll get dollars.
theSell dollars and exchange them for yen.and,Dollar weakens and yen strengthensThis is caused.
This is the mechanism by which the yen appreciates during a recession.
*The Swiss franc, the currency of Switzerland, also appreciates for the same reason, just like the yen.
Meanwhile, in America
The United States, on the other hand, has prospered by accepting capital from all over the world.That is why, during natural disasters, the Lehman Shock, the coronavirus, etc.The dollar plummets during times of shock.。
Japan and Germany, who are lending the funds, should be thanked by the US and France, lol.
quotation On the 25th, Chinese media outlet Kuai Zixun published an article claiming that Japan's status as the world's largest net creditor nation for the 27th consecutive year was a "complete lie" that Japan was in a "lost two decades."
The article points out that Chinese people have a major misunderstanding of Japan in recent years, which is that they mistakenly believe that Japan's slow economic growth rate means "Japan is in decline." It states that while Japan's domestic economic growth is indeed sluggish, it is making significant profits overseas through foreign investment, and points out that "China's net external assets and overseas investment activities do not even come close to Japan's." (Seadchina27th consecutive year... Japan is the world's largest creditor nation. "The 'lost 20 years' is a complete lie," says China.(Quoted from...)
lastly
If the world experiences an economic downturn or if natural disasters occur in Japan, the yen will appreciate.Remembering this will likely be useful when making investment decisions.
If you're interested in foreign exchange, I recommend the following books.You can read a sample on Amazon, so even just looking at the table of contents might be helpful.
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