This is the 723rd original article published by Xijing Research Institute and the 682nd original article published by Dr. Zhao Jian.
I went to Tokyo to make a report at the end of March, which coincided with the experience of Japanese economy many Item History: day Economic index Reached a new high of 41000 points, room price It also returned to the peak of history and recovered the "lost thirty years" at one fell swoop; After decades of deflation and depression, prices have gone up through Expansion; The Bank of Japan also bid farewell to the 17 year interest rate cut and the nearly 10 year YCC, and began an unprecedented plus Interest .....
I was walking in the streets of Tokyo that day, watching the dense crowd, and thinking of the great changes that have taken place behind this peaceful daily life. Daily life is the deconstruction of the meaning of grand narrative In fact, many of the so-called "great changes" of the terrible waves, transmitted to personal daily life, is only a small ripple for the time being, of course, will continue to be impacted later. In front of various historical records, although ordinary Japanese also felt the pain caused by the rising cost of living, the extremely low unemployment rate and huge wealth effect also brought greater welfare improvement and confidence to Japan. On the whole, everything is getting better.
However, One historical record needs to be mentioned separately, that is, the huge depreciation of the yen 。 At that time, the exchange rate had fallen to a new low of 150 yen/dollar for decades. At that time, a number of big traders attending the meeting agreed that the yen would rebound at the bottom and the Bank of Japan would not let the yen fall below 150, so it was recommended to match the yen over. However, the market specializes in "fatal conceit" of various linear extrapolations and transaction forecasts The yen not only unexpectedly dropped below 150, but also continued to fall after breaking 150, breaking through all support points at one fell swoop until 160 cities down. It finally fell below 160 on April 29, Has created a historical record since 1990 。 Panic began to appear. After all, the yen had assumed the function of a safe haven currency for a long time. The tragic depreciation of the yen also made The Japanese stocks and houses that finally rose are discounted or even lost when converted into the national currency 。 The investors who predicted the rebound of the yen on the forum also suffered huge losses, and investors who had confidence in Japan's economy and assets began to waver. Some people even claimed that there would be a financial crisis in Japan.
However, the exchange rate of the yen soon reversed dramatically. After the exchange rate broke 160, it was violently pulled up 500 points by bulls. It was like an ambush that lured the enemy deep into the ground. Suddenly, the big counter attack recovered many lost areas. We can't help asking what the Bank of Japan is doing, what it wants to do, and why it has adopted such a strategy to create such large fluctuations? What will happen next?
To understand the current strategy of the Bank of Japan, First, we should understand the current situation facing Japan's economy 。 The current situation in Japan can be said that the economy and policy space are both in Between multiple contradictions 。 first Although we have finally come out of decades of deflation and realized inflation, because of the strong driving force of imported and cost driven inflation, income growth can not catch up with prices, people's pain is still obvious. Fortunately, the employment situation has never been stronger, and the situation of young people is still improving. But the latest data shows that the signs of falling inflation and economic weakness are beginning to appear. secondly Although asset prices have gone out of the long bear market, considering the marginal thrust of foreign capital, especially hot money, there are also greater risks behind the new high asset prices. Once the external funds withdraw, both the stock market and the housing market will have a huge shock. third The United States unexpectedly experienced re inflation, the Federal Reserve delayed interest rate cuts beyond expectations, the interest rate gap between Japan and the United States continued to expand, and the CARRY transaction continued to squeeze the value of the yen. fourth The balance of payments structure is further distorted. The primary income surplus mainly depends on overseas investment income, and most of the investment income has been retained overseas, without repatriation of domestic consumption and investment to form GDP and employment.
It needs special mention Japan's overseas investment and the resulting special balance of payments structure 。 The Nikkei News recently reported that Japan's balance of payments structure has undergone tremendous changes in recent years. Before 2010, Japan had maintained a current account surplus with its manufacturing advantages and strong global demand. After 2011, the current account trade deficit increased, The initial income such as interest and income from overseas investment becomes the core of the surplus. As a result, Japan has formed a balance of payments structure that does not rely on export earnings but relies on investment earnings 。 In recent years, there has been a tendency that overseas earnings do not return to Japan. According to statistics, Japan's initial revenue surplus in 2023 will be 34.5 trillion yen, a record high. Among them, the dividend and other direct investment income of overseas subsidiaries of Japanese enterprises was surplus of 20.6 trillion yen, and the reinvestment income accumulated by overseas subsidiaries as retained profits was 10.3 trillion yen. Half of these profits have remained overseas and have not returned to Japan.
To sum up, the current situation facing the yen is:
1， Inflation has returned, but the economy has begun to weaken , it is likely to enter a small stagflation cycle, and stagflation is a relatively worried problem;
2. A large amount of foreign capital has poured in, and asset prices have recovered their lost ground. However, if the US dollar does not cut interest rates, foreign capital is likely to flow out at any time, Risk of asset price collapse ；
3， Japan US interest margin continues to expand CARRY transaction is likely to draw domestic liquidity again, resulting in the ineffectiveness of domestic monetary policy;
4. A large amount of overseas investment income does not flow back to China. It earns GNP but does not earn GDP. How to attract domestic capital back to serve the local real economy is a policy option.
In the face of these four contradictions, It is a good move to choose a sharp depreciation of the exchange rate, but of course it is also a dangerous move ——Any policy needs to pay a price. It can not be both necessary and necessary. It only needs to consider the situation and choose the analytical solution with larger benefits and smaller costs. The beauty of the yen's "one-step" devaluation and rapid rebound at 160 is that:
1. Stimulate external demand and change distorted trade structure On the one hand, it can stimulate the export of goods under the current account, make Japanese manufacturing more high-quality and cheaper, and improve competitiveness in the current situation of increasingly scarce global demand; On the other hand, it attracts a large number of overseas tourists to come to China for consumption and investment - the house prices and stock prices, which originally created historical highs, are once again becoming cheaper when the yen depreciates significantly.
2. Blocking CARRY arbitrage transactions around Japan US interest margin 。 According to the theory of interest rate parity, if there is arbitrage space between the two currencies on interest rates, the exchange rate must be hedged in order to achieve equilibrium, so as to make the profits of CARRY transactions zero and achieve no arbitrage equilibrium, otherwise the capital will continue to flow in one direction. The interest margin between Japan and the United States is now about 4%. If the yen appreciates by 4%, then the balance of monetary assets will be achieved. How to let the yen appreciate by 4%? That is to say, an overshoot type of extreme depreciation will be carried out, and the market will agree that the exchange rate will overshoot after being demoted to a certain position (devaluation to the limit and excess is appreciation), so that the reflexive expectation of appreciation will appear. This equilibrium will be achieved, and the outflow of Japanese capital through CARRY transactions will also stop.
3. The devaluation of the yen makes it cost-effective for Japanese capital and retained profits to return to China for consumption and investment Japanese yen's overseas capital will return to China under the stimulus of exchange rate depreciation, thus stimulating the domestic economy.
4. Lock in the overseas capital entering Japan's real estate and stock market in the previous stage (Many are Chinese investors, as well as European and American investors such as Warren Buffett), so that their earnings are locked in the yen. Because once you want to sell yen assets and exchange them for other currencies, you will find that because of the sharp depreciation of the yen, the investment income will be greatly reduced or even lost.
It can be seen that for the yen, which is in the midst of multiple "big changes", Rapid depreciation is indeed a wonderful move, but it is also a dangerous move. Because such a sharp depreciation is a huge consumption of national credit. Fortunately, Japan is a developed financial system in which interest rates and exchange rates are fully market-oriented and capital can flow freely. Although the market creates fluctuations, it will also spontaneously adjust. The Bank of Japan has set up a defense line at 160, but it is not the last line of defense. In fact, no one can say for sure, but now it has formed a psychological defense line. therefore From 120-160, this vast depreciation zone has indeed replaced more policy space in general by sacrificing the exchange rate.
Is there any enlightenment for the RMB exchange rate in the "triangle problem"? In the past two years or more, because both the duration and the upside down range of the China US interest rate gap have created a historical record, there have also been huge CARRY transactions, resulting in the currency generated by domestic easing policies being sucked away like a black hole by the US dollar with high interest rates, There is a strange situation that "the United States is inflationary when it collects water, and China is deflationary when it releases water" This is actually Siphon effect of US dollar interest rate increase 。 To change this situation It is necessary to let the market generate the expectation of RMB appreciation similar to the interest rate difference between China and the United States (about 3% annually) Otherwise, people will continue to exchange dollars (or even borrow RMB at low interest rates to exchange dollars), and then buy dollars with a stable yield of 5% to finance.
There are two ways to change the unbalanced capital flow structure, First, improve the return on RMB assets No matter bonds, stocks or real estate, at least 5% or more of the yield is guaranteed (assuming the RMB exchange rate is stable), so as to achieve marginal balance in asset selection compared with the yield of US dollar assets. The second is to increase the value of the RMB itself, That is to increase the appreciation expectation of the RMB exchange rate. Drawing on this wonderful move of the Bank of Japan, the RMB exchange rate actually has a lot of room for operation, especially under the pressure of deflation. Of course, when real estate generates negative returns, It is also a good choice to make the A-share market have a stable earning effect.
