User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Wednesday September 9, 2009 - 18:24:19 GMT
FX Solutions -

Share This Story:
| | Email

The Koan of Yen--Safe Haven and the Japanese Economy

One of the most surprising developments of the financial crisis and recession has been the continued strength of the Japanese Yen.

The return of relative stability to the world financial system has not prevented the yen from retaining the majority of its crisis induced advances. The Japanese currency has held onto about 75% of its gains against the dollar, 65% versus the euro, 60% from the aussie and 75% from the sterling. In comparison the dollar has retained only 47% of its euro gain, 33% of its aussie improvement and 56% of its sterling take.

From its pre-crisis lows late last summer the yen appreciated 21% against the dollar, 34% against the euro, 47% versus the aussie and 53% opposed to the pound. The dollar also improved dramatically, gaining 23% against the euro, 39% versus the Australian Dollar and 32% against the pound.

The dollar and the yen were the only major currencies that strengthened during the crisis and that alone gave de facto status to each as a safe haven currency. But as the dislocations in the financial system have lessened so has the safe haven benefit to the dollar. Not so, or not nearly so much, for the yen. Why has the Japanese currency retained more of its crisis enhanced quality?

At the height of the crisis enormous quantities of Treasuries were purchased by panicked investors. The demand for dollars to buy those US instruments was one of the driving forces behind the greenback’s ascent. But as the acute phase of the crisis has ebbed, the funds placed in the safety of T-Bills, Notes and Bonds have gradually left the United States seeking more remunerative investments elsewhere.

The effect on the dollar has been plain and predictable. Close to half of its crisis gains have been lost. The rationale for the dollar’s rise and fall in response to the financial crisis has been logical, determined by the balance between the need for safety and earning, risk and return.

If the rise in the yen was due to the same influx of safety seeking funds, one possible explanation for the subsequent improvement of the yen is that the owners of those funds find in Japan a congenial investment environment.

Perhaps investors expect the Japanese economy to recover earlier than the United States or Europe. Japan is still the second largest economy in the world and its position in Asia and as a supplier to China, the largest industrial country to sustain strong economic growth, could help restore the Japanese economy. But in reality the Japanese economy has been underperforming for more than a 15 years throughout the economic rise of China. Japanese decline is largely due to internal factors, including expensive and protected consumer and agricultural sectors, bureaucratic and regulatory control of much of the economy, pointless and never ending domestic spending and a stultified political system that inhibited most change.

Then perhaps the victorious Democratic Party of Japan (DPJ) will be able to revive the economy and move the country into the 21st century? 

Yet the policy prescriptions of the DPJ do not give the impression of de-regulatory pro-growth, consumer centered plans for Japan’s economy. Japanese public debt is the highest in the industrialized world at 170% of GDP. Yet the election platform of the DPJ, with its Keynesian emphasis on government spending and its vague anti-capitalist and anti-globalization stances seems particularly ill-suited to reviving the world’s largest export dependant economy.

When the vagueness of the DPJ economic policies is coupled with the inexperience of their legislators and the opposition of the long serving bureaucrats that really run the Japanese economy the promise for reform and restoration becomes even more problematic. It is very hard to discern a positive yen aspect from the prospective DPJ economic policies.

If the prospects for the Japanese economy have not fortified the yen then perhaps the currency has been supported by its ostensible role as a proxy trade for the Chinese Yuan?

When the financial crisis struck the Beijing Government ended the managed appreciation of the yuan; it has been static against the dollar since last fall. Did the yen play a substitute role to the Chinese currency with traders keeping long positions in the yen as a replacement for the unavailable yuan? While it is true that the end of yuan appreciation and the advent of yen strength coincide, it is more likely that the proxy currencies for the yuan are the Australian and New Zealand Dollars, which have had strong upward moves largely tied to the success of the Chinese economic stimulus.

If the strong yen is not a predictor of an economically recovered Japan and if its yuan proxy quality is limited, what are the remaining reasons behind its supposed safe haven status?
The idea of the yen as a safe haven currency can be ascribed to two factors. First the likelihood of Japanese default is very low and when tied to Japan’s recent history of deflation Japanese bonds provide the investor with safety of funds and currency stability. Logically Japan could serve a secure repository for cash. That was also the position of the dollar and its issuer the United States Government. Both currencies scored highly in the financial crisis.

The second factor applies only to the yen and might be called the empirical choice; the yen rose during the financial crisis therefore it was a safe haven currency. By any measured judgment the yen is an unusual choice for a safe haven currency. Except for the unity of the Japanese political system most other economic and interest rate factors would seem to be against it. The Japanese economy has performed dismally over the past 15 years and Japan has one of the oldest and most rapidly declining populations in the world. Its potential for economic growth has been so limited that the Bank of Japan has not had its base rate over 0.5% since 1995.

But the financial crisis played a stronger hand than comparative economics. The worldwide collapse in interest rates destroyed the rationale for the carry trade. The result was a vastly strengthened yen because the attendant trade to the selling of the yen crosses was the panic buying of the yen against the US Dollar. As the carry trade loans came home to Japan and the speculative positions in the yen crosses vanished with the credit lines of the hedge funds, the yen was bought extensively but mostly to close existing positions. Once the loans and trading positions were covered there was far less speculative positioning against the yen than would be found in a normal market.

The equation of a stronger yen with financial turmoil was not due to the inherent strength and security of the Japanese economy but to the bubble markets in the carry trade and yen funding. The yen did not rise because traders sought the safety of Japanese investments. The yen rose because the currency markets were overwhelmed by the unwinding of the carry trade and yen funding positions.

But from an empirical view the yen appreciation coincided perfectly with the deepening of the financial crisis. It certainly appeared that the yen was being sought as a safe haven currency. And since the yen had strengthened it became, in fact if not in economic logic, a safe haven currency.

Yen strength, to borrow a phrase, prospered in a fit of absence of mind. The tremendous force of the deleveraging carry trade raised the yen to its current heights. But those forces were one way, buying the yen to close shorts but not opening new long positions which would later have to be reversed in their turn.

During the financial crisis the yen was not a safe haven currency. With the ending of the crisis the yen has not returned to pre-crisis trading levels. The evidence that there were few safe haven flows into the yen is simple; none have left Japan to weaken the yen with the crisis abatement.

For the dollar, a true safe haven during the crisis, the flows that entered during the crisis have now largely left. The dollar was boosted by the flows in and declined as they departed. The yen became a safe haven only by a trading default of the yen crosses.


Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."

Actionable trading levels delivered to YOUR charts in real-time.

Register To Test Your Amazing Trader

GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Mon 10 Sep 2018
AA 08:30 GB- GDP, Trade, Output
Tue 11 Sep 2018
AA 08:30 GB- Employment Decision
A 09:00 DE- ZEW Survey
Wed 12 Sep 2018
A 12:30 US- PPI
A 14:30 US- EIA Crude
A 18:00 US- Beige Book
Thu 13 Sep 2018
A 1:30 AU- Employment
AA 11:00 GB- Bank of England Decision
AA 11:45 EZ- European Central Bank Decision
A 12:30 US- Weekly Jobless
AA 12:30 US- CPI
Fri 14 Sep 2018
A 08:30 GB- GDP
AA 12:30 US- Retail Sales
A 13:15 US- Industrial Production
AA 14:00 US- prelim University of Michigan

John M. Bland, MBA
co-founding Partner,

Global-View Affiliate Program

We are starting an affiliate program to market some of our products.

Send me an email if you would be interested or if you know someone who would like to be an affiliate. Generous commissions payout for those accepted.

Put the word "affiliate" in the email subject line.

Contact us

Start trading with forex broker Markets Cube

Max McKegg's Daily Forex Trading Forecasts

Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.

Request a TRIAL of Max's Forex Service.


Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map

Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.



By using this website, you are agreeing to our Privacy Policy and Terms of Use, and Cookie Policy

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105