Why the JPY is a safe haven for investors?

Why the JPY is a safe haven for investors?

Japan is the third most powerful economy in the world, and the Japanese economy is a booming export-dependent economy.

It is a productive country with advanced capabilities to help it compete and lead the global market.

This is supported by increasing national output and current account surpluses, as well as the softness of the Bank of Japan and investor intervention.

Japan is one of the largest global creditors of other countries. It has established its own global economic system, financing and development projects that deepen its relations with other countries, not to mention the financial surpluses from its foreign investments, which increase foreign currency bonds and flows to the central bank,

The yen is a global finance currency and ranks fourth in the central bank’s reserves, where it comes after the dollar, the euro and the pound

The Japanese Yen is characterized by a low interest rate compared to the rest of the other currencies. All of the above makes the Japanese Yen safe haven in trading and investing in commercial projects that protects the owner from the fluctuations we see in other currencies, which reduces the losses of currency fall

In the event of economic crises, political turmoil and natural disasters, global investors resort to the Japanese yen. This strange phenomenon is constantly occurring in global trading markets

Which happens: when there is borrowing for the purpose of investment is the interest rate of the most important decision-making factors and since the yen is characterized by a low interest rate investors resort to borrow the Japanese yen and then convert it to dollars or any currency as investment in any country and in the event of any economic crisis or natural disaster Or a political strike, investors rush out of their investments and repay loans to their source. Since these funds have to be converted into Japanese yen, this leads to an increase in demand for the yen, which means that the yen will rise against the rest of the currencies

However, when the yen rises, this harms the Japanese economy and is a problem because Japan is a country that relies mainly on exports and not on domestic consumption so it seeks to be weak currency so that the manufacturing costs are low and when the yen rises, the central bank intervenes and sells the yen intensively to devalue the yen. Manufacturing costs

Rima Alsheikh Ali
Rima Alsheikh Ali
Economic Consultant
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