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Anatomy of Sudden Yen Appreciations
Author:
Mr. Fei Hannull

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Mr. Niklas J Westelius
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Series:
IMF Working Papers
Volume/Issue:
Volume 2019: Issue 136
Language:
English
Publication Date:
01 Jul 2019
DOI:
https://doi.org/10.5089/9781498317344.001
ISBN:
9781498317344
ISSN:
1018-5941
Pages:
19
Keywords:
WP; carry trade; yen; yen appreciation; appreciation; carry trade reversal; safe haven effects; exchange rate appreciations; Japan; carry trade position; carry trade activity; interest rate differential; Exchange rates; Currencies; Vector autoregression; Futures; Zero lower bound; Global
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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.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2019: Issue 136