Yellow Submarine

Goodbye, yellow submarine

At the very end of the fiscal year in Japan (FY 03/04, 31 March), people found that the Bank of Japan (BoJ) has disappeared from periskopnoy depth. It seems that the last torpedo salvo of the global foreign exchange market BoJ performed on 9 March, when treydery decided to try the patience of the Japanese monetary authorities below the level of 111 yen to the dollar. Time for the chosen wisely, lunch in New York - Tokyo's dark night, the local authorities went for the hamburger. So, somebody big in the hope of a sweet sleep Tokyo sold a lot of dollars against the yen and the course grinbeka collapse of the 111th largest figure to 110.20 yen, where stuknulsya directly on the cast iron head BoJ. Status quo was restored immediately - one American treyder told that "it took time for this so much that I have only once managed to pop eyelashes."

We are in the market have become accustomed to the constant presence of "sweet couple" MoF (Ministry of Finance of Japan) / BoJ. Key to this submarine based vMoF, they determine the "correct" during the Japanese yen and the Bank of Japan is a market with large-scale intervention in the visible as the argument. In fact, over the past year were the sole support of the U.S. intervention in the foreign exchange market MoF / BoJ. Last year they set a new record by selling, mostly against the U.S. dollar more than Y20 trillion (old record was recorded in 1999 at Y7.64 trillion).

The nature of intervention in 2003 was the "smoothing", the Japanese simply do not allow yen strengthened against the dollar and the euro too sharply in the confrontation with the world currency markets. Often a situation arises when the next monthly report on the volume of MoF intervention, people wondered: "They again sold so many yen, but still could not contain the fall in USD-JPY?". In fact, in 2003 the dollar has lost 15% against the euro, while against the yen, it fell to 10% from Y119 to Y107. In fact, it is important to understand that the euro-yen traded around the middle of budget rate of Japanese exporters Y135. Last MoF data show an annual growth of Japanese exports to Asia more than 23%, in Europe more than 12%, and about 5% decline in trade with the States.

Vice Finance Minister Masakazu Hayyashi, commenting on another January record (the intervention was Y7.1545 trillion ($ 67.56) from 27 December to 28 January) said that Japan will continue to act against speculative volatility in the international currency market, even if this implies astronomical costs of the intervention. "Our position - the currency should reflect the fundamental economic parameters. We will take necessary action against speculative movements of the market. When such movements become excessive, the intervention will inevitably follow, even if this requires huge amounts."

It is important to note that the tactics of the Japanese monetary authorities from January through March unchanged at a very aggressive, for two months, torpedo tubes thrown into the market Y10 trillion. The course is departed from 105.20 dollars to 112.35, as the cork from the champagne. Experienced foreign treydery know that on the eve of the meetings of finance ministers and central bankers, Big Seven (G7) Japanese on the horizon not to be seen. Maybe they skripit a couple of teeth - three weeks of watching the currency market abuses, but did not intervene. This was the normal Japanese mentality - they are not willing to hear criticism from their colleagues for a protectionist policies in favor of domestic exporters. This rule helped to trade. But not this year. Before the G7 in Florida, 6 / 7 February, the Japanese intervenili frankly, saying that the full consent of the major trading partners.

For the second year the situation is so smart that the Japanese buying up cheap dollars with depth in order to ensure the most favorable conditions for their exports, domestic locomotive economy. Dollars gained from intervention, BoJ instantly to the next auction, puts in long-term U.S. Treasury bonds. On the one hand, the Japanese have thus finance the huge budget gap of Americans (estimate $ 521 billion in 2004), on the other - reinforcing its influence in the United States. It is not surprising that at the last G7 meeting in Boca Reyton monetary policy of Japan has not even criticized the Europeans - the absolute triumph.

Foreign exchange reserves of Japan has nearly doubled over the past year, according to data from the March 5, they were at the end of February, $ 776.86 billion (an increase of + $ 35.61 billion to January). Typically, the Japanese placed their foreign exchange reserves in UST reasuries (kaznacheykah) and European gosobligatsiyah. Their total increase in reserves of up to $ 756.59 billion (+ $ 27.79 billion, compared with January).

Now, for many it is already clear that the Japanese at the end of FY03/04 provide an opportunity for our exporters to sell dollars at the high price of Y112, and the Euro is almost at the rate of 140 yen per euro. The end of the fiscal year - this time, the repatriation of the yen when the Japanese business returns around the world the harvest home. It is time for annual reports and tax payments, surplus-buldo yen, of course. Hence we see on price charts that can see - the fall of the dollar from 112 back toward 105 yen to the dollar, the fall of the euro from Y140 to Y128 to date.

As Japanese exports on the rise, To the people expect good corporate annual reports. And not least for the Japanese business, which is the proceeds of EZ euros and dollars in the States you can buy a lot of cheap yen, which after a couple of weeks again becomes very expensive. Nikkey 225 Index traded steadily above 11,000, the influx of foreign investment in Japanese assets has been consistently high throughout the year, and this allows the MoF / BoJ relax for a while.

Yesterday's MoF data showed net purchases by foreigners of Japanese effluent Y1.148 trillion (net, net of sales) for the week of March 15-19 - is an absolute record since the MoF started to publish weekly data in April 2001. The previous record Y1.032 trillion net was raised two weeks earlier. At last week's stock market index Nikkei 225 tumble above 11600 to new 21-month peak, supported by the strengthening of global markets and optimism about the domestic economy. Today the index Nikkey 225 of the barrier and look test 12000, the current price of 11770, which means that the above record proderzhitsya short (MoF data for this week will see next Thursday).

MoF data also revealed a new wave of interest in the Japanese investors to foreign gosobyazatelstvam after heavy sales in the previous week. As a result, the net inflow of portfolio investment amounted to Y589 billion, compared with Y1.460 billion for the week of 8-12 March.

Since the beginning of April to start a new FY04/05, and the huge Japanese institutional investors again begin to hunt for long-term foreign assets. These comrades ryschut with their aggressive investments around the world, and the more American kaznacheek they buy, the more dollars for these purchases will have to buy them for their yen. They again will shnyryat across Europe in search of profitable placement of funds in the euro-denominated assets, and we again hope to join this stream, along with all the speculators world. If such a scenario will be realized in reality, the Bank of Japan lost the need chock USD-JPY, the market will go favorably for the MoF / BoJ end in itself. But while in the yard yet FY03/04 relax do not recommend. It is sharp-sighted gaze at the horizon, there is not a brilliant yellow submarine periscopes in the end - very very southern location is now a USD-JPY and EUR-JPY.

Evgeny Romanov
Senior Analyst Company
TeleTRADE