Japan: What has saved the yen? - Natixis

Patrick Artus, Research Analyst at Natixis, suggests that given the rapid and endless rise in the money supply (the central bank’s balance sheet) in Japan, one would expect the yen to depreciate significantly and such a depreciation was observed from early 2013 to early 2015, but then the yen stabilised and went on to appreciate.

Key Quotes

“Why did the yen stop depreciating in early 2015? What saved the yen? Probably its safe-haven role in response to:

a)    The negative view held by investors of emerging countries and the euro zone until late 2016;

b)    The uncertainty in 2015 and 2016 surrounding the situation of the Chinese economy and the renminbi’s exchange rate;

c)    The uncertainty since early 2017 surrounding economic policy and the economic situation in the United States.”

“The uncertainty and concern surrounding other countries would have to disappear for monetary conditions in Japan to lead the yen to depreciate as might be expected.”