At this point, we often address the world's largest economy - the United States. We certainly don't neglect
the world's number two economy - China's. And what next? The world's third largest economy lost its position last year
Japan, which was overtaken by Germany. Not because Germany was growing so much. But because Japan
lost so much. Since we last looked at German data a few days ago, let's take a quick look at Friday's
a trip to the economy of the land of the rising sun.
After waking up this morning, we could read that the Bank of Japan decided to
leaving its current monetary policy settings unchanged. That was the bet. The key interest rate
lies in the range 0 - 0.1 %. Although it remains pinned to zero, it is no longer negative. This was the case until this year.
March for 17 long years.
Even so, the Bank of Japan reports that it will continue bond purchases to the extent approved in
March. The central bank has previously said it is buying about 6 trillion yen of bonds a month, which is
more than USD 80 billion. This was a disappointment for some investors. They had expected that the Bank of Japan could make these purchases
limit. But this is not possible in a situation where the latest data do not make the Bank of Japan happy. Inflation,
which the central bank has long been trying to stir up, is weakening. The consumer price index in Tokyo in
April rose by 1.8 % yoy, weaker than the expected 2.6 % and March's 2.4 %.
Tokyo inflation acts as an indicator of broader inflation in Japan, given its impact on
the country's economy.
Yet the Japanese yen would need the Bank of Japan to be able to at least partially stretch
hawk wings. It doesn't matter whether it was by limiting monthly asset purchases or by increasing
interest rates. Why? The Japanese yen remains under relentless selling pressure. The weakening Japanese
currency is associated with the carry trade strategy, which uses the interest rate differential. The way this works is that the Japanese
only because of the low rates, it figures as a financing currency. In addition, we have record short positions not only in
hedge funds, but also asset managers. And there is also a strong dollar against the yen.
It is not weakening because the moment of the first interest rate cut is being further delayed overseas. In terms of numbers, at the start of this year, one dollar was worth 140 yen; today it is almost 157 yen. Japan's central bankers are trying to
to prevent further yen depreciation through verbal interventions. But the more often verbal interventions are repeated, the
less they are effective. Czech central bankers could talk about this after the experience of 2013... (In the case of
However, the Czech National Bank's attempt at the time was to weaken the koruna verbally, not to support it.)
But back to Japan. There, there will be nothing for it but for the Bank of Japan to actually go ahead with the foreign exchange
interventions to prop up the yen. However, it would be much more effective in the future for the Japanese
the central bank did not rely on an extremely loose monetary policy. If the Bank of Japan does not
keep interest rates at zero, it will not have to cover its back. The Japanese example is transferable to
all over the world
Markéta Šichtařová
English 
Czech