Comment by xbmcuser
9 hours ago
It is not completely but part of the reason Japan wants to defend it's currency is inflation because of increase in energy prices.
9 hours ago
It is not completely but part of the reason Japan wants to defend it's currency is inflation because of increase in energy prices.
In the sense that weak currency makes everything you buy from foreign partners more expensive, sure.
The place where you go wrong is drawing a straight line to the US actions in Iran. They’re not directly connected.
Oil is a major thing that requires foreign currency to buy, as Japan has no meaningful oil reserves
The devaluation of the Yen against the dollar (from the typical 110:1 to these days 150:1) started around 2021 and has been a source of angst in Japan for quite some time. People were complaining about it constantly when I was last in Tokyo in December 2025, when oil was at $70/barrel.
The devaluation didn't really get out of control until 2022 IME.
In 2021 you were still able to divide by 100 and not be far off in conversion. Typically traded between 105 ~ 115.
Nowadays the Yen is so weak that I unconditionally convert my whole paycheck to USD after paying rent. Even if risk-free interest rates between Japan and United States converge, there's just not much reason to hold Yen if you want to avoid losing purchasing power to inflation.
e.g. I can risk money in NTT stock for a meager 3.0% dividend yield. Or I can convert to USD and keep the cash in my brokerage account, where it earns 3.4% interest. If I want to raise the risk to similar levels as the NTT stock, I would be looking at utility company ETFs yielding up to 7% for the past few years. Of course, there is foreign exchange risk (e.g. 10% move down in USD/JPY and a year's worth of carry trade gains are eliminated). But if the fundamentals were there for a stronger Yen, then intervention wouldn't be necessary. So for now I'm exposing myself to FX risk for the chance at getting marginally better wealth preservation.
As someone who hasn't followed this closely, when/why did things switch? Japan had the opposite deflation problem for years (decades?) and IIRC tried battling that with "money printer go brrrr" for a long time. How did inflation become their primary problem?
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Do you think the USD inflation will be less than 0.4% above the JPY inflation? I mean, the USA has basically just admitted to us they feel they're on the precipice of a bond interest death spiral, which will cause hyperinflation when they print money to end it.