This article examines the factors behind the yen exchange rate remaining in the ¥160 range, focusing on underlying demand, the outflow of funds overseas and repatriation. Movements in overseas funds and demand for dollar-denominated resource payments are cited as factors driving yen selling.
The author explains that, regarding periods when the yen exchange rate exceeds ¥160, he has suggested the possibility of the rate breaking out of its range. In addition to the interest-rate differential between Japan and the United States and fiscal easing, he points to underlying demand for yen selling as a factor behind yen depreciation.
The movement of corporate funds earned overseas back to Japan, or repatriation, is cited as a key reason the yen is sold and does not recover. The proportion of funds earned overseas that is repatriated to Japan is estimated at 50–60%, and there was a period in the past when tax reform encouraged repatriation.
Japanese companies have a strong tendency to retain funds earned overseas abroad, and some argue that even when the funds return to Japan, there are few uses for them domestically. Overseas funds are directed toward dollar-denominated investments and business expansion, becoming a negative factor for underlying demand for yen.
Resource purchases are also primarily denominated in dollars. Settlements for resources such as crude oil and gas involve selling yen and generate underlying demand for dollars. It has also been pointed out that overseas investment by individual investors generates demand for dollars and supports yen depreciation.
Looking ahead, the author concludes that the battle around ¥160 is not merely a matter of market positioning and could become a permanent feature. He argues that major measures, including creating mechanisms to keep yen funds in Japan and developing the country into an international financial center, are necessary.