Why This Topic Landed in Japan

The Bank of Japan raised its policy rate from around 1.0% to around 1.25% at its September 18 meeting, with two board members dissenting. But instead of the yen firming on a narrower rate gap, dollar-buying led and the yen slid back to the 157-per-dollar range. Around the same time, August's trade balance came in at a deficit of 1.1056 trillion yen — a fourth straight monthly deficit — and a post by the commentator Hiroyuki ("A 1-trillion-yen trade deficit while people call the weak yen a windfall — aren't you idiots?") spread widely.

The gap between the intuition that "a rate hike means a stronger yen" and the reality of a weaker yen deepened the sense of the currency's frailty, and it tied into fears that rising prices and variable mortgage rates squeeze households. The move looked counterintuitive, but the hike was already largely priced in, and the US rate outlook and the decision's contents weighed on the currency too. The "1-trillion-yen deficit" refers to a single month — August — and the fourth straight monthly trade shortfall, while the current account stays positive on a large income surplus, so the trade balance alone does not capture the whole economy.

Key Reaction Themes

  • Cynicism about the yen's weakness — The largest group scoffed at a "trash currency" and said a 0.25% hike could never stop the slide.
  • Demands for the next hike, and the gap that won't close — Many read it as the market already "demanding" more, with the US-Japan rate gap unbridgeable.
  • Household survival fears — A sizable group pointed to weak yen, low wages, high prices, and rising mortgage rates hitting home.
  • "Trade isn't the whole economy" — A group pushed back on Hiroyuki, citing Japan as a domestic-demand country and the income-surplus that keeps the current account positive.
  • Calls for real wages — A minority said they'd accept a weak yen if only real wages would rise.

What Japanese Netizens Are Saying

The yen slides back to 157 after the hike

The Bank of Japan raised its policy rate to about 1.25%, yet the yen slid back toward 157 per dollar.

Sources: Yomiuri, 2ch, 2ch

Comments:

  • "The trash currency is alive and well, lol."
  • "It's not rate hikes we need, it's economic growth, you know?"
  • "It's because America decided on a rate hike for the first time in a while."
  • "The main drivers of the current weak yen are America's high interest rates (over 5%) to curb inflation, the US-Japan rate gap, plus high oil prices and the outflow from the digital deficit — the background and mechanism are completely different from Abenomics over ten years ago. Slapping down the political slogan 'it's Abe's fault' without even knowing global macro trends is basically confessing you have zero knowledge of economics."
  • "We've stopped making things at home that keep selling abroad and don't fix it — a declining country — and on top of that, domestic investors anticipate this and sell trillions of yen to buy foreign stocks, which is what causes the excessive weakness. The rate gap is one factor but not the essence. Unless we fundamentally rethink how the country works, the yen won't strengthen."
  • "The market is already demanding the next rate hike."
  • "America's raising rates too, so the gap probably won't narrow."
  • "My mortgage!!"
  • "My cash stuffed under the mattress is about to blaze!"
  • "America hiked again, so 0.25% won't stop the yen from falling. I thought they'd raise it by about 0.5%."
  • "A rate hike and the yen still falls — the yen must have really little value."
  • "Weak yen, low wages, high prices, and loan hell are all coming for you lot."
  • "No, a weak yen is fine — just grow the economy, or rather raise real wages, please."

Hiroyuki's "1-trillion-yen trade deficit" jab

A viral post by Hiroyuki about a 1-trillion-yen trade deficit reopened a debate over judging the economy by trade alone.

Comments:

  • "Well, trade is like that, sure — but the economy isn't only trade, you know? lol"
  • "Isn't Japan a domestic-demand country?"
  • "It's been in deficit almost the whole time. As a domestic-demand country, of course a weak currency means a loss — that's obvious."
  • "Wasn't it the media that kept saying 'the weak yen is a windfall'?"
  • "Also, labor costs are soaring across Asia too, so the appeal is fading. Thailand has maxed out; now it's down to Laos and Vietnam.."
  • "For the people who think the weak yen will somehow get dealt with — Hiroyuki must be finding this tough, huh."