Anatomy of Sudden Yen Appreciations

July 1, 2019

Preview Citation

Format: Chicago

Fei Han, and Niklas J Westelius. Anatomy of Sudden Yen Appreciations, (USA: International Monetary Fund, 2019) accessed November 8, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The yen is an important barometer for the Japanese economy. Depreciations are typically associated with favorable economic developments such as increased corporate profits, rising equity prices, and upward pressure on domestic consumer prices. On the other hand, large and sharp appreciations run the risk of lowering actual and expected inflation, squeezing corporate profits, generating a negative wealth effect through depressed equity prices, and reducing confidence in the Bank of Japan’s efforts to reflate the domestic economy and achieve the inflation target. This paper takes a closer look at underlying drivers of rapid yen appreciations, highlighting the key role of carry-trade and the zero lower bound as important amplifiers.

Subject: Currencies, Econometric analysis, Exchange rates, Financial institutions, Financial services, Foreign exchange, Futures, Money, Vector autoregression, Zero lower bound

Keywords: Appreciation, Carry trade, Carry trade activity, Carry trade position, Carry trade reversal, Currencies, Exchange rate appreciations, Exchange rates, Futures, Global, Interest rate differential, Japan, Safe haven effects, Vector autoregression, WP, Yen, Yen appreciation, Zero lower bound

Publication Details

Pages:

19
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/136
Stock No:

WPIEA2019136
ISBN:

9781498317344
ISSN:

1018-5941

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