First of all, although it's a weekday essay today, it's quite a lot. I've been t

First of all, although it's a weekday essay today, it's quite a lot. I've been talking about the yen exchange rate, which has a lot of questions recently. For your information, I can't post an essay on Sunday morning because I have work on the weekend. I'll post a weekend essay on Monday morning. Let's get to the point.

The pace of the yen's strengthening is progressing quite quickly. The dollar-yen exchange rate was threatened by 152 yen, which was the highest point in November last year, but has fallen to 145 yen, showing a strong trend against the dollar. The won-yen exchange rate shows a bigger change. Just two or three weeks ago, it fell to 850 won per 100 yen, igniting the yen's bearish trend. Thinking that the weak yen is a kind of necessity that leads to further, the number of bets on the yen's bullish transition is gradually decreasing. In fact, the argument that even if the yen turns strong, the interest rate gap with the U.S. is so large that it is difficult to make a significant bullish transition. Yes, expectations for a strong yen transition have been weak for a long time… They are becoming lethargic in the face of a weak yen that exceeds market expectations.

The Bank of Japan (BOJ) wants a strong yen. If the yen continues to weaken, the burden of inflation is significant. And despite low interest rates, Japanese domestic demand is experiencing significant side effects. And these side effects are greatly shaking the approval ratings of the Kishida Cabinet. From a political point of view, we need a strong yen. Shall we take a look at the article?

"The local atmosphere is worsening as the number of bankruptcies among small and medium-sized enterprises has increased significantly due to the surging import prices caused by the yen." A total of 4,042 companies went bankrupt in the first half of this year in Japan, the highest level in five years. Japanese Prime Minister Fumio Kishida's approval rating has fallen to the 20 percent range. Based on a survey released on November 20, the Mainichi Shimbun had an approval rating of 21 percent, the Yomiuri Shimbun 24 percent, and the Asahi Shimbun 25 percent.

These media reported, "The approval rating of the Kishida Cabinet is the lowest since the Liberal Democratic Party regained power in 2012," adding, "We have come up with economic stimulus measures such as income tax cuts and cash aid for low-income families to ease the impact of inflation, but antipathy against the Kishida Cabinet is spreading among the people." (Korea Economy, Nov. 28, 23.)

By the way, when everyone is shouting for a strong yen, if you make a strong yen... I knew it would happen. Along with this, the speed and intensity of the yen's strength will get out of control. The Bank of Japan wants a strong yen transition. But it's not a strong, fast yen transition... Slowly, slowly, stably... You want an orderly yen transition that goes on without shock to the market. Yes. Then won't it move when the market's expectations for a strong yen ease to a certain level? In this atmosphere, there are articles like this.

"Global hedge funds are increasing their bets on the direction that the Japanese yen will weaken (the yen/dollar exchange rate will rise), a report showed. According to the U.S. Commodity Futures Trading Commission (CFTC) data cited by Bloomberg News on the 4th, hedge funds' net short position (selling yen) contracts against the yen rose by 2,833 to 65,611 through the 28th of last month. This is the largest since April 2022, meaning that the yen's exchange rate against the dollar will rise amid speculation that the Bank of Japan is unlikely to turn hawkish. (Medium)

"The outlook for the yen's continued weakness is shared among foreign investors," said Fukuhiro Ezawa, head of financial markets at Standard Chartered Bank. "This is consistent with the recent surge in the short positions of hedge funds." (Energy Economy, 23.12.4)

Yes... Doesn't the market atmosphere of foreign exchange speculation, which wants a strong yen, feel somewhat eased? Chance is when the market slightly delayed its expectations for a strong yen. In this case, as the BoJ moves, it is necessary to make a gradual change in the yen's strength, which has been weak against other currencies. BoJ is good at this. Stealth tightening… something like this. I already have a track record in the past… Let's look at an article.

It has been speculated again that the Bank of Japan (BOJ) is conducting so-called 'stealth tapering' that reduces government bond purchases unnoticed.

According to the Wall Street Journal (WSJ) on Wednesday, JPMorgan estimated that 7.7 trillion yen (77.7 trillion won) in Japanese government bonds (JGBs) that the BOJ bought last month, excluding reinvestment in maturities. This is the lowest monthly figure since October 2014.

WSJ said, "It looks very similar to tapering," adding, "BOJ also seems to be tightening its (currency) policy." (Yonhap Infomax, 17.10.16)

This is an article that was reported in 17 years. Even at that time, it was orderly... slow... and the market rarely detects it, so we prefer to tapering, which is tightening. If the market is careless, we can turn to stealth. What's that? If you look at the article above, it shows a case of slightly reducing the amount of government bonds that you buy. Wouldn't there be something similar this time? It's slightly less than the existing amount of money you buy. I quote the article.

The Bank of Japan (BOJ) has reduced its regular purchases of long-term government bonds.

The BOK announced the purchase of regular government bonds worth a total of 1.5 trillion yen on the 4th. There are a total of four sections from 1-3 years of remaining maturity to 1-5 years ▲ 10-25 years ▲ more than 25 years. Of these, the purchase volume for the 10-25 year section was reduced by 50 billion yen compared to the previous round. There is no change in the other section. Since the financial policy-making meeting in October, when the YCC policy was revised, the BOK has reduced the purchase volume for the third time.

This is the first time that the remaining maturity of the long-term goods section has been touched on 10 to 25 years. From the regular purchase conducted on the 29th of last month, the purchase amount for this section was 200 billion yen. (Yonhap Infomax, 23.12.4)

Yes. The quoted article says that we are reducing the purchase of long-term government bonds. The last paragraph, "This is the first time we have touched the remaining 10 to 25 years of maturity, which is a long-term section," seems to be the key. Are you making a difference under the water? BoJ's money unwinding doesn't just stop at buying government bonds. Some buy corporate bonds, some buy stock ETFs and REITs. But it's not that well known when it comes to buying government bonds. In the interest of the market.. It could be possible to reduce purchases of ETFs and REITs that are somewhat off the radar. I quote the article.

As the Bank of Japan's purchase of risky assets, which began as part of its monetary easing policy in 2010, is likely to not proceed at the end of 2023, attention is focusing on whether the Bank of Japan's continued monetary easing stance will return to normalization.

According to Bloomberg and other foreign media, the Bank of Japan plans not to purchase J-REIT and exchange-traded funds (ETF) for the first time this year since 2010 or plans to significantly reduce it. The Bank of Japan's J-REIT purchase was last at 1.2 billion yen in June 22, but the purchase of ETFs has also been made only three times, the smallest in 10 years, while the Nikkei average stock price has risen to the level of 33 years. (Global Economic, November 27, 23.)

Yes. Central banks are less likely to buy unless it's a safe asset. They print money while purchasing assets. If you reverse this, you issue money with the assets you buy as collateral. That money is not a safe short-term government bond, but a long-term government bond as collateral. Or they print REITs or ETFs as risk assets as collateral, as quoted in the article above. That's why the term "risk asset purchase" comes out in the article above. Anyway.. I used to buy these assets, but since I bought them in June of 22, I've been saying that I haven't bought REITs or ETFs until now. It's the smallest number in 10 years since ETF purchases began. Yes. Maybe they're changing little by little. If ETFs and REITs are not purchased for a long time, people will notice in the market a little bit even if they are not interested. And these articles flow out little by little.

"Bank of Japan Conducts One-Time Financial Policy Review Workshop... No Voice to Change Policy Operations" (Global Economic, December 5, 23.)

It is said that a workshop was held on December 5th to review the current policy on easing monetary policy. Of course, it is impossible to remove it in a short period of time, but it may raise questions about what this means. Is it a slight signal? : Due to this change in stealth, the yen has started to strengthen gradually. The won-yen exchange rate rose slightly from the 850 won level, and rebounded sharply from 900 won the previous day, exceeding 915 won in the early morning market this morning. What happened the day before? There were reports that the BOJ Governor Ueda met with Prime Minister Kishida. And on the same day, Ueda's remarks attract the market's attention. Let's take a look.


The Nihon Keizai Shimbun reported on the 7th that Kazuo Ueda, the president of the Bank of Japan (BOJ), met with Japanese Prime Minister Fumio Kishida. The newspaper said that Prime Minister Kishida and Ueda met at the prime minister's residence later in the day and that they exchanged views on the financial and economic situation.

The dollar-yen exchange rate widened its fall. As of 3:34 p.m., the dollar-yen exchange rate was down 0.74 percent to 146.282 yen.

Earlier, Ueda said at the House of Councillors' Finance and Finance Committee that if the prospect of achieving the inflation target is set, "the review of the negative interest rate lifting and short- and long-term interest rate manipulation (yield curve control) policies will come into view." Regarding the rate hike after the negative interest rate is lifted, he added, "It depends on the economic and financial situation at that time." (Yonhap Infomax, December 7, 23.)

At a press conference last month, Ueda mentioned his concerns about exit strategies, saying that caution should be taken in light of the impact it may have on the market when it comes to stopping buying ETFs and REITs. Note that we are now in a situation where we are referring to the exit, regardless of whether we plan to exit or not