Japan "Maintains Large-Scale Monetary Easing"... Record-Low Yen Spurs Buzz in 'Entekeu'

Weak Yen Spurs Interest in 'Entekeu'
Japan ETF Net Assets Surpass 100 Billion for the First Time
Bank of Japan "No Intention to Raise Interest Rates"

On the 23rd of last month, Japanese yen and US dollars at the Counterfeit Response Center of Hana Bank Headquarters in Jung-gu, Seoul. [Image source=Yonhap News]

[Asia Economy Reporter Yoon Seul-gi] #. Mr. A, a worker in his 20s who used to invest mainly in domestic blue-chip stocks, is currently considering 'Entech' (Yen + financial technology). Mr. A said, "I never even thought about currency tech because I had never tried it before, but recently the yen has dropped significantly," adding, "People around me have been talking about making pocket money through short-term trading with Entech, so I'm intrigued." He continued, "Since I can just travel to Japan anyway even if the yen falls, I plan to wait until the won-yen exchange rate drops to around 930 won."

Since the beginning of this year, the yen depreciation (weak yen) phenomenon has continued, leading more people to buy yen to earn foreign exchange gains. The '100 yen = 1000 won' exchange rate formula has already been broken as the yen's value plummeted, and foreign exchange gains benefit from tax exemption.

According to the financial sector on the 22nd, the yen exchange rate stands at 953 won per 100 yen. The yen-dollar exchange rate is again in the 137 yen range. After plunging to the 137 yen level last month, marking the lowest point in 24 years, the yen's weakness continues.

As the weak yen phenomenon persists, the number of people investing in yen has increased. The yen deposit balance at the five major commercial banks (KB Kookmin, Shinhan, Woori, Hana, Nonghyup) reached 606.8 billion yen at the end of last month, an increase of about 18.2% (110.4 billion yen) compared to the end of last year (496.4 billion yen).

According to the 'Resident Foreign Currency Deposit Trends' announced by the Bank of Korea last month, the yen deposit balance of domestic residents was $5.48 billion at the end of May, up 4.3% from $5.25 billion at the end of last year. It was the only foreign currency deposit balance to increase.

Money is also flowing into Japanese funds. This is due to growing expectations that Japanese export companies will gain price competitiveness thanks to the weak yen. According to the Korea Exchange, as of the closing price on the 7th, the 'TIGER Japan Nikkei 225' ETF recently recorded net assets of 128.6 billion won. The TIGER Japan Nikkei 225 ETF is a currency-exposed ETF that tracks the Nikkei 225 index, consisting of 225 companies representing the Japanese stock market, including Japanese IT and software company SoftBank and global semiconductor equipment company Tokyo Electron.

On the 14th, the yen-dollar exchange rate, which rose to the 138 yen per dollar level, was displayed on the electronic quotation board at a foreign exchange brokerage office in Tokyo, Japan. [Image source=Yonhap News]

The main reason for the recent sharp drop in the yen's value is attributed to the U.S. interest rate hikes. While Japan maintains a negative interest rate of -0.1%, the U.S. has raised its benchmark interest rate, leading to strong dollar buying. Earlier, the U.S. Federal Reserve (Fed) implemented a giant step by raising the benchmark interest rate by 0.75 percentage points at once in June to counter inflation, and another giant step is likely this month.

The weak yen phenomenon is expected to continue for the time being. On the 21st, the Bank of Japan (BOJ) announced it would maintain its large-scale monetary easing policy. At the monetary policy meeting held that day, the BOJ decided to keep the short-term interest rate at -0.1% and continue large-scale monetary easing by purchasing long-term government bonds without limit to guide the 10-year government bond yield, a long-term interest rate indicator, to around 0%. Unlike major countries such as the U.S. that are raising interest rates to curb inflation, Japan decided to continue its 'solo ultra-low interest rate' policy.

BOJ Governor Haruhiko Kuroda said at a press conference that day regarding 'large-scale monetary easing,' "The impact of raising interest rates at this point would be significantly greater than calculated by models," and added, "We have no intention of raising rates. We will persistently continue monetary easing."

As a result, the prospect that the yen's value against the dollar could fall to 150 yen is gaining traction. Aceke Sakakibara, director of the Indian Economic Research Institute and once known as 'Mr. Yen' in the international foreign exchange market, said in an interview with Bloomberg TV last May, "The monetary easing policy will continue until March next year, when BOJ Governor Kuroda's term ends," and added, "There is a possibility that the yen's value could drop close to 150 yen per dollar."

This content was produced with the assistance of AI translation services.