Kavan Choksi Japan Explaining the Major Drivers of the Japanese Yen

 Kavan Choksi Japan Explaining the Major Drivers of the Japanese Yen

When it comes to the exchange rates of Asian currencies, there are many theories related to it. You can evaluate this in light of the interest rate parity, purchasing power parity, balance of payments, Fisher effect models, etc., all of which can be the explanations for exchange rates. There are numerous factors like the relative rate of interest and price level etc., to be considered. In actual practice, all these models tend to work well in the real market, where the supply and demand decide the rates. Above these, there are also many psychological factors too affecting the same.

The major economic parameters are GDP, inflation, industrial production, retail sales, as well as trade balance, etc. Investors in foreign currencies should consider various add-on information such as employment info, interest rates of the central bank, and daily news on politics, natural disasters, war, changing government policies, etc. All of these can have a significant impact on the exchange rates.

Kavan Choksi Japan tips for Yen traders

Tankan is considered to be a very crucial report as far as the market movements of Japan currency and stock exchange are considered. When it comes to trading on Yen, Kavan Choksi Japan advises the traders to review the latest Tankan survey. It is the quarterly survey reported by the Bank of Japan (BoJ), which backs up the performance of the Yen currency.

Even though BoJ has maintained very low rates after the property bubble of Japan collapsed, the bank also got involved in the process of currency intervention. This is the process of selling the Yen off to keep the exports of Japan more flexible and competitive. This currency intervention had also caused some political consequences; however, the bank was quite hesitant to intervene in forex markets. The trade balance of Japan also impacted the BoJ policy and also forex rates. The country of Japan had huge trade surpluses historically, but there was also large public debt and an aging population, which held them back. As of late, a big percentage of Japan’s debt has been held domestically, but the reassuring fact is that the Japanese investors are very willing to accept the low rate returns as well.

Even though Japan has high debt levels, the traders are more comfortable with the debt balance of the country. These traders also try to balance the high debt with the high surplus of trade. Moreover, the devaluation of the dollar and the goodwill of the Yen as a safe haven had led Japanese currencies to be much stronger.

Japanese economy

Japan is now the second among the major oldest economies in the globe. It has the lowest fertility rate, which means there is an aging workforce at an increased rate, and there is a fewer younger workforce to support the economy through consumption and taxation. To counteract this, Japan has been opening its borders for immigrant foreign workers lately to address the shortage of young labor.

Moreover, Japan has a highly advanced economy and a solid, technologically skilled workforce. Even though many strong industries like shipbuilding migrated to other countries like China and South Korea, Kavan Choksi Japan points out thatJapan still remains the major manufacturer of electronic goods, automobiles, and technological components. All of these had awarded Japan significant exposure in the global economy.

Ian A. Blocker