Over the past four years, the Yen has gradually been gaining value against the US Dollar, despite being an excellent haven asset and with the exception of a few weeks in 2020 and others in 2018, investors have had little reason to seek security outside the stock market. But then how is it that a currency of the most indebted country in the world, in terms of public debt, manages to be a bastion of refuge in times of greater uncertainty for investors, not least because it does not have a robust economy behind it that justifies capital preference? Not to mention the fact that the numerous stimulus programs implemented by the Bank of Japan, coupled with the recurrently low-interest rates, would lead to less interest in the Yen.
There are some justifications for this, from the start the political, economic and business stability that Japan has in the tradition, but mainly at an extremely high level of savings to which is added a very substantial investment of domestic savings in the country’s debt, which reinforces investor confidence. On the corporate side, the savings strategy is also present at an extraordinary level, with Japanese companies having record levels of cash available, $4.8 trillion in 2019, which despite the efforts of former Prime Minister Shinzo Abe, to reduce these the size of the coffers, the prevailing mentality has remained cautious, so it is not surprising that this climate of security is transmitted to large investors when it is time to seek refuge in the face of difficult times.
