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Investors in Tokyo were buoyed by the U.S. market’s positive performance, which has increasingly led to speculation that the Fed might ease its monetary policy in response to softening economic indicators.
The remarkable increase in visitor numbers was notably influenced by school holidays in East Asia and Europe, which contributed to a notable rise in arrivals from these regions. The influx of tourists comes as Japan continues to recover from the pandemic's impact on global travel. As of July, Japan has seen over 21 million visitors this year, placing it on track to exceed the pre-pandemic annual record of 31.9 million set in 2019.
The decline was largely attributed to the yen's strengthening, which hit a six-month high against the dollar, trading at 138 yen per dollar during the session.
The recovery was largely attributed to a speech delivered by Bank of Japan (BOJ) Deputy Governor Shinichi Uchida, who assured investors that the central bank would maintain its ultra-loose monetary policy.
Historical patterns suggest that after periods of yen-buying interventions, the BOJ has occasionally turned to yen-selling interventions to counteract excessive appreciation. Nomura, Japan’s largest brokerage, recently highlighted this possibility, noting that while it isn’t yet their primary scenario, future Ministry of Finance (MOF) interventions to curb yen strength could be on the table.
The Bank of Japan (BOJ) has started signaling a potential end to its prolonged ultra-loose monetary policy, hinting at future interest rate hikes.
The yen's depreciation has had significant implications for Japan's economy, increasing import costs and contributing to rising consumer prices. This has put additional strain on households and businesses, prompting the BOJ to take a more active stance.
The yen’s drop from approximately ¥161 to ¥157 on July 11, following the release of the U.S. consumer price index for June, and a subsequent fall from around ¥159 to ¥157 on July 12, after the U.S. producer price index release, prompted these interventions. Market estimates suggest that Japanese authorities may have spent between ¥3 trillion and ¥4 trillion on July 11 alone, with additional expenditures of about ¥2 trillion on July 12.
Under Kanda's guidance, subsequent interventions occurred in October 2022, and again from April to May and June to July of this year, involving a substantial total of approximately ¥25 trillion. His approach was seen as a firm message to market speculators that the Finance Ministry was closely monitoring currency movements.
The Central Minimum Wages Council, comprised of representatives from labor, employers, and public interest officials, deliberates annually to determine the proposed hike based on factors such as inflation, prevailing wage levels, and economic indicators.
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