On April 15th, the onshore Chinese Yuan (CNY) against the Japanese Yen (JPY) has risen to a new high of 19.86 since the Yuan exchange rate reform in 2015, and it is very likely to break through the significant threshold of 20 next. Historically, apart from a brief surpassing of the 20 mark in 2015, the last time the Yuan-to-Yen exchange rate stood above this level was as far back as 1993.

On April 19th, local time, the Japanese Yen's exchange rate against the US Dollar (USD) in the Tokyo foreign exchange market fell below the 127 JPY per USD threshold, marking a nearly two-decade low since May 2002. By the close, the USD-to-JPY exchange rate was at 128.178.

However, there is no sign of relief for the Yen's historic consecutive decline. Following the rise in US Treasury yields overnight on Tuesday, April 19th, the Yen fell towards 130 JPY per USD on April 20th. The Yen has been weakening for the 14th consecutive trading day, dropping by 0.3% to 129.30, with traders betting on further divergence in US-Japan interest rates.

The consensus among Tokyo traders that the Yen-to-USD exchange rate will fall to 130 within the next few months is likely to become a reality sooner, as investors prepare for the possibility of policymakers seeking market intervention to defend the Yen.

What do the official authorities say? Bank of Japan Governor Haruhiko Kuroda referred to the recent depreciation of the Yen on April 18th as "a very rapid exchange rate movement," but its effect in curbing the Yen's decline is limited. Japanese Finance Minister Shunichi Suzuki stated on Tuesday that the pace of Yen depreciation is fast, and given the current economic environment, the weakening Yen has a strong negative impact.

Suzuki said, "There is a positive side, but given the current economic environment, there is a strong negative impact." What Suzuki referred to is the rise in import costs due to Yen depreciation, and the damage to businesses that cannot resist the increase in import costs due to currency weakness. "We are monitoring the动向 of the foreign exchange market with a strong sense of vigilance," he said.

Noticed? The central bank governor and the finance minister merely verbally expressed two words: concern. That is to say, there are no, and perhaps no plans for, substantial intervention measures. This aligns with Japan's long-term and short-term actual interests.

I believe that the recent significant depreciation of the Yen against the USD, Euro (EUR), British Pound (GBP), and CNY, four international currencies, is either a cause for Japan's secret joy or a deliberate act, at least a laissez-faire approach. This is because Japan has an export-oriented economy, and Yen depreciation greatly promotes exports, which in turn is beneficial for promoting Japan's economic growth. Especially in the context of the ongoing pandemic, where the recovery of global industrial and supply chains is increasingly difficult, the harm to Japan's export-oriented economy is significant. If the Yen exchange rate is not supportive at this juncture, and instead of depreciating, it appreciates, it would be devastating to the Japanese economy. The Bank of Japan governor and the finance minister are well aware of this.

Some may question, saying this is just your personal speculation. However, there is historical evidence of the Yen's trend ruining the Japanese economy. Are you familiar with the Plaza Accord in the history of the world's economic and financial exchange rates?The Plaza Accord was an agreement in the early 1980s, when the United States experienced a significant increase in fiscal deficits and a substantial rise in trade deficits. The U.S. aimed to improve its international balance of payments by increasing the competitiveness of its exports through the devaluation of the dollar, hence the signing of this accord. The signing of the Plaza Accord was strongly promoted by Japan's Ministry of Finance (the department responsible for financial and fiscal affairs in Japan before 2000).

At that time, Japan's economy was overheating, and the appreciation of the yen could help Japan expand into overseas markets and establish joint ventures. After the signing of the Plaza Accord, the yen appreciated significantly, leading to a rapid expansion of domestic bubbles. Eventually, the bursting of the real estate bubble caused a long-term stagnation in the Japanese economy.