In the early hours of the 11th, the exchange rate of the Japanese yen against the US dollar in the foreign exchange market in New York dropped sharply due to the possibility of the United States temporarily refraining from interest rate cuts. The rate, which was previously considered the Japanese government's tolerance line at 152 yen to the US dollar, plummeted to 153.168 yen to the US dollar.

Earlier, Japanese Finance Minister Toshimitsu Suzuki told the media that the government is closely monitoring exchange rate fluctuations with a high sense of urgency and does not rule out taking any options to address excessive exchange rate volatility.

The Bank of Japan held a monetary policy meeting on March 19, raising the policy interest rate from -0.1% to the range of 0% to 0.1% and deciding to end yield curve control policy while ceasing purchases of exchange-traded funds and real estate investment trusts. This marks the first rate hike by the Bank of Japan in 17 years.

However, since the Bank of Japan announced its exit from negative interest rate policy, the yen has not only failed to appreciate but has experienced a rare occurrence of accelerated depreciation.

According to the latest data released by the U.S. Commodity Futures Trading Commission, in the week ending April 2nd, the net short positions in the Japanese yen held by global hedge funds and asset management companies rose to 148,388 contracts, the highest level since January 2007.

With international capital heavily shorting the yen, on the night of the 10th, the exchange rate was 152 yen to the dollar, reaching the lowest level in 34 years since June 1990. By this morning, the yen had fallen to 153 yen.

Japanese officials have recently been signaling intervention frequently. According to the Wall Street Journal, Fumio Kishida publicly stated that the Japanese government is closely monitoring foreign exchange trends and views excessive volatility as unacceptable.

Kishida said, "In response to excessive volatility, we hope to take appropriate measures, and we will not rule out any policy options."

He also stated that Japan will work with the Group of Seven (G7) to address exchange rate issues, pointing out that the G7 has stated that disorderly fluctuations in the yen exchange rate may have negative effects on the global economy.

Earlier, Japanese Finance Minister Toshimitsu Suzuki also publicly warned of "decisive action" to intervene in the currency market.

However, market participants believe that even if Japanese authorities take intervention measures, it will be difficult to fundamentally affect the yen's trend, especially given the still significant interest rate differentials with the United States. Therefore, the outlook for the yen remains pessimistic.

According to Xinhua News Agency, a report released by the Tokyo Shoko Research on the 8th revealed that as government-issued preferential loans during the COVID-19 pandemic period come due, the financial situation of some companies has worsened, leading to a significant increase in bankruptcies in Japan for the fiscal year 2023 (April 2023 to March 2024).

The report stated that the number of bankruptcies in Japan for the previous fiscal year with liabilities exceeding 10 million yen (approximately $65,789 USD) increased by 31.58% year-on-year to 9,053, with the total liabilities of bankrupt companies exceeding 24.6 trillion yen.

The report indicated that the total liabilities of bankrupt companies have increased year-on-year for two consecutive years. In the fiscal year 2023, bankruptcies were predominantly from small and medium-sized enterprises with fewer employees, and the number of bankruptcies in all ten industries surveyed increased year-on-year.

Analysis suggests that the main reason for the significant increase in bankruptcies is the concentration of repayments of interest-free unsecured loans issued by the Japanese government during the COVID-19 pandemic starting in 2023, causing many poorly performing small and medium-sized enterprises to be overwhelmed.

Additionally, factors such as rising prices and increased operating costs due to wage increases to address labor shortages have also significantly added to the financial burden on companies.

The report noted that as the interest-free unsecured loans provided by the Japanese government for small and medium-sized enterprises during the pandemic will reach a peak repayment period after April of this year, it is expected that the number of companies facing financial difficulties will continue to increase.

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