{
  "title": "The Curious Case of the Yen as a Safe Haven Currency: A Forensic Analysis",
  "publication": "IMF Working Papers, November 6, 2013",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/the-curious-case-of-the-yen-as-a-safe-haven-currency-a-forensic-analysis-41039",
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  "summary": "During risk-off episodes, the yen is a safe haven currency and on average appreciates against the U.S. dollar. We investigate the proximate causes of yen risk-off appreciations.",
  "sections": [
    {
      "heading": "Summary and central finding",
      "content": "- During risk-off episodes, the yen is a safe haven currency and on average appreciates against the U.S. dollar.\n- The proximate causes of yen risk-off appreciations are investigated.\n- Neither capital inflows nor expectations of the future monetary policy stance can explain the yen’s safe haven behavior.\n- Changes in market participants’ risk perceptions trigger derivatives trading, which in turn lead to changes in the spot exchange rate without capital flows.\n- Risk-off episodes coincide with forward hedging and reduced net short positions or a buildup of net long positions in yen."
    },
    {
      "heading": "Empirical findings and mechanisms",
      "content": "- No explanatory role found for capital inflows in yen risk-off appreciations.\n- No explanatory role found for expectations of future monetary policy stance.\n- Evidence points to derivatives trading as the transmission from risk perception changes to spot exchange rate moves, operating without associated capital flows.\n- Specific derivatives-market behaviors observed during risk-off episodes:\n  - Forward hedging.\n  - Reduced net short positions in yen.\n  - Buildup of net long positions in yen."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Offshore and complex financial transactions should be part of spillover analyses.\n- The effectiveness of capital flow management measures might be limited in certain cases when derivatives-driven moves dominate.\n- Monetary policy coordination to address excessive exchange rate volatility might be limited in certain cases when the mechanism is derivatives trading rather than capital flows."
    },
    {
      "heading": "Subjects and keywords",
      "content": "- Subjects: Balance of payments statistics, Currencies, Currency markets, Exchange rates, Financial markets, Foreign exchange, Money, Real exchange rates\n- Keywords: appreciation, Capital Flows, Currencies, Currency markets, Derivatives, derivatives markets transaction, exchange rate, Exchange rates, FX derivatives market, Global, Real exchange rates, risk-off appreciation, Safe Haven, safe haven status, WP, yen, yen appreciation, Yen Volatility\n\n---\n\n Content in this bundle\n\n- The yen as a safe-haven: mechanisms, evidence, and policy implications\n  - The yen as a safe-haven: mechanisms, evidence, and policy implications (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - The yen as a safe-haven: mechanisms, evidence, and policy implications (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-curious-case-of-the-yen-as-a-safe-haven-currency-a-forensic-analysis-41039"
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    "Authors: Dennis P Botman, Irineu E de Carvalho Filho, Waikei R Lam",
    "Published: November 6, 2013",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781475513424.001",
    "During risk-off episodes, the yen is a safe haven currency and on average appreciates against the U.S. dollar.",
    "The proximate causes of yen risk-off appreciations are investigated.",
    "Neither capital inflows nor expectations of the future monetary policy stance can explain the yen’s safe haven behavior.",
    "Changes in market participants’ risk perceptions trigger derivatives trading, which in turn lead to changes in the spot exchange rate without capital flows.",
    "Risk-off episodes coincide with forward hedging and reduced net short positions or a buildup of net long positions in yen.",
    "No explanatory role found for capital inflows in yen risk-off appreciations.",
    "No explanatory role found for expectations of future monetary policy stance.",
    "Evidence points to derivatives trading as the transmission from risk perception changes to spot exchange rate moves, operating without associated capital flows.",
    "Specific derivatives-market behaviors observed during risk-off episodes:",
    "Offshore and complex financial transactions should be part of spillover analyses.",
    "The effectiveness of capital flow management measures might be limited in certain cases when derivatives-driven moves dominate.",
    "Monetary policy coordination to address excessive exchange rate volatility might be limited in certain cases when the mechanism is derivatives trading rather than capital flows.",
    "Subjects: Balance of payments statistics, Currencies, Currency markets, Exchange rates, Financial markets, Foreign exchange, Money, Real exchange rates",
    "Keywords: appreciation, Capital Flows, Currencies, Currency markets, Derivatives, derivatives markets transaction, exchange rate, Exchange rates, FX derivatives market, Global, Real exchange rates, risk-off appreciation, Safe Haven, safe haven status, WP, yen, yen appreciation, Yen Volatility",
    "**The yen as a safe-haven: mechanisms, evidence, and policy implications**"
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