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Worrying Implications of the Japanese Yen’s Depreciation



The depreciation of the Japanese yen has recently been attracting wide attention. With the yen softened to JPY 120 against the dollar, the Bank of Japan (BoJ) offered to buy unlimited amounts of 10-year Japanese government bonds (JGBs) at 0.25% on March 28, stepping into the market to defend its implicit yield cap for the second time in the year.

The move came after the 10-year JGB yield crept up to a six-year high of 0.245% in early trade, just a half of a basis point shy of the BoJ’s tolerance ceiling under its yield curve control policy. There is no doubt that BoJ’s move would further exacerbate the depreciation of the yen. That saw the dollar scale a fresh six-year peak of 123.03 yen, giving it a gain of 6.9% for the month. The Japanese currency fell as low as 124.81 at one point, nearing the JPY 125 mark. Meanwhile, the ailing euro rose 4% on the yen this month to 134.56. The euro has misplaced about 2.3% on the greenback in the identical interval, however at USD 1.0954 it is above the current two-year trough of USD 1.0804.

The fall in the yen has kept the U.S. dollar index to 99.098, up 2.5% for the month. The yen has been weakening recently with the fallout from the Russia-Ukraine conflict blighting currency markets, and has fallen close to 6% this year, the worst-performing G10. Researchers at ANBOUND pointed out that, as the Japanese currency continues to depreciate, the risk posed by this cannot be overlook. Furthermore, the fluctuations in the yen may cause changes, not only in the evolution of currency market structure, but also recalls the turbulence brought by the depreciation of the Japanese currency to Southeast Asian countries and other emerging markets. All in all, this is more likely to bring about profound changes in the global financial and monetary systems.

Most market players believe it is mainly due to the difference between the BoJ’s continued to take a persistent stance when it comes to monetary easing, and the Federal Reserve intensively tightening its monetary policy stance. United States 10-year Treasuries yields jumped 33 basis points last week and are up a staggering 67% basis points on the month at 2.49%. The rapid boost in the dollar index and the sustained rise of bond yields have fundamentally changed the global zero interest rates monetary environment under the pandemic, bringing increasing pressure to the Japanese currency, which continues to push for quantitative easing. More market traders have also been aware that the current situation of the yen has essentially changed compared to pre-pandemic levels. The high level of inflation in Europe and the U.S. has led to accelerated interest rate hikes in the U.S. against the dollar, which has also prompted the European Central Bank to ease back, ready to begin “tapering”. Meanwhile, emerging markets such as Brazil have already raised interest rates repeatedly to bring inflation down.

With the deflation trends, the continued easing of the yen is certainly under fire, increasing the trend toward “risk-free” currency arbitrage. This has broken the balance of borrowing yen to invest in the U.S. capital market, and returning the yen with profits. The changes here indicate that the yen is losing its role as a safe-haven currency in a low-interest-rate environment.

Some market analysis believes that those funds taking advantage of the zero-interest-rate arbitrage of the yen are basically unwinding positions, and the reliability of the yen as a global safe-haven currency is gradually declining. Instead, it has become a barometer of investors’ views on interest rates. Therefore, ANBOUND researchers believe that the yen may fall into a vicious cycle of sustained depreciation if the BoJ policy remains unchanged in the case that the previous equilibrium has broken.

However, both the BoJ and the government remain adamant that a “moderate” depreciation of the Japanese currency will help in strengthen exports and lift inflation to its 2% target. As things stand, Japan has been running a trade deficit for months on the back of rising energy and commodity prices, as the yen has continued to depreciate since last year. The depreciation of the yen is further fueling imported inflation, raising costs for companies and households, which is not conducive to enhancing Japan’s export competitiveness.

In addition, Kyodo News stated that the interest rate gap between Japan and the U.S. is expanding. There are also supply constraints caused by the impact of higher resource prices. With Japan’s current account deficit and long-term concerns about the yen, investors have begun a positioning strategy of betting its currency will depreciate further against the dollar. In this case, the BoJ is more likely to lose control of its inflation target soon. In terms of capital flows, once the market has a consensus expectation of the persistence of yen depreciation, not only will overseas funds be withdrawn, but they will also cause an outflow of domestic capital.

Although the BoJ can continue to provide ample liquidity, the Japanese market, which loses investment value, will face a negative cycle of capital outflow and market fall, leading to a vicious depreciation of the yen in the short term. In fact, the BoJ’s sustained easing policy has not achieved its goal of boosting the domestic economy but has resulted in as much as USD 10 trillion of overseas investment. Whether the depreciation of the yen can bring the return of overseas funds remains to be observed. In the absence of changes in Japan’s domestic economic structure, it is more likely that funds will persist in outflowing to overseas markets. This will not have the effect of monetary easing on the Japanese economy but is more likely to trigger a new crisis due to the turmoil in the capital market.

What is even more worrying is that if the turmoil caused by this round of depreciation continues, the exchange rate risks may spread to Southeast Asia and other emerging market countries with close economic and trade ties. In the context of global currency contraction and intensified geopolitical risks, emerging markets have already faced the pressure of capital outflow and exchange rate depreciation, and funds have been persistently flowing out of emerging markets. The situation is more complex than the crisis in 1997, and the possibility of a broader conjuncture is building up.

In the case that the yen keeps depreciating and gradually loses its role as a safe-haven currency, its more profound impact lies in the evolution of the international financial system and currency landscape. In a globalized financial market, the yen has been used as a safe-haven currency for a long time due to the size of the Japanese economy, has become a currency asset allocated by international investors. In the context of intensifying geopolitical risks and increasingly evident differences in monetary policies of various countries, not only the long-term position of the U.S. dollar is being challenged, but other major currencies are also in the midst of the game of change.

Goldman Sachs has previously mentioned that the world is now undergoing a “paradigm shift” from globalization to regionalization. With the trend, capital faces the embarrassment of having nowhere to go, and some traditional “hedge markets” are difficult to play a role, which further promotes the reconstruction of the international capital market and the trend of capital returning to localization. The volatilities of the yen reflect the changes and are also pushing it further towards geopolitics.

A researcher at ANBOUND, graduated from the School of Mathematics at Peking University and has a PhD in economics from the University of Birmingham, UK

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World Order Is Old Order: New World Order Is No Order



The grand hallucinations: When there is any order, it always becomes visible as an orderly progression, when it is supposed to be a secret or an invisible order, then it is grand hallucinations for a cult of illusionists. Observe how the World Order is an old order, and notice how the new world order is no order. The random engagements in illusionary cultish acts of chaos sold as order. Fakery sold and resold as victory, illusions pushed as hallucinations of success. Courage is needed to see the big magical acts of grand hallucinations.

The feel of afternoon-high: Across the world, free economies are already bent, twisted or broken, while procedures, policies and laws, everything on sale for the right price. Mighty-money, delivered crisply stacked, shrink-wrapped as freshly printed solutions, to buy more chaos, spread misery and create the economic hallucinations and stage the smoke and mirrors, all without any totals, balances or columns. Sold to feel a real afternoon-high.

The interchange: When integrity gone, fakery dominates, when real value-creation gone value-manipulation regulates, when vision gone illusions thrives, when national economics gone hallucinations declared as great success and reality interchanges to fakery.  

The elasticity left: Needed across the free economies of the world, no further proof required, a total change, no further verification needed, as political power no longer economical power, no further help needed, as most nations in need of basic diaper change. Visible damage to skills and competency, inability to understand and articulate the real problems with grassroots solutions is now a big tragedy of our times. Nations already stretched via rubber band economy, some with elasticity left before going bust.

The truth: Which nation has the capacity to face the truth? Which nation can fix itself not just top reshuffle, but rather from top to bottom to the real core? Which nation can uplift its citizenry to stand up to global age skills and cope with global speed and competitiveness? Which nation is capable of understanding and has the right to mobilize its hidden national entrepreneurialism and provide a future for the next generation?

No electricity and missing bulbs: Is there any value left in the most cherished Machiavellian style political power without ever creating any economic power? Is there any remaining value in economic power play of today without entrepreneurial growth models? What good are economies when stuck in waste paper baskets still without digitization like a nation being without electricity? What real economic value is created when odd mindsets playing with economic development procedures like creating light but with no bulb?  

Welcome to cold facts and warm realties.

The branded nations: Why each and every single nation of our planet is now branded every single day of the year? Like it or not, agree with what is said, disagree with what gossiped, simple fact of the day,  each nation is branded, between each sunrise and sunset. Here is some advanced level insight for the national leaderships on global corporate communication challenges, as what may be altering their efforts on global affairs, what might mold their global trades as the deep undercurrents of global ‘likes’ and ‘dislikes’ from the global populace shape their national global image and rate of popularly and any level of respect on world stage.

The global opinion: Observe how fast the world changed, how the ocean of “global opinion” is now drowning ponds of “national opinion”. Notice, nations already intoxicated, in joy over the popularity of their own national opinion, while having just an opposite global opinion on the world stage. What does this mean to a nation’s image supremacy, how does this translate into economic impacts? Why is any global opinion of any kind important anyway? Be cautious, if such important topics are not discussed in your boardrooms, check out the restrooms.

The fabric of humankind. Every huge, little, deadly, serious or funny incident of any kind, becomes ‘alive’ in global social media, where despite all controls its is processed with common sense with common emotions, commented and circulated around the world, many times, registered, measured, analyzed, criticized and humanized as good, bad or ugly in the minds of the global populace.  No one can stop it. Facing truth is now a new global challenge of moral strength, something that increasingly demands insight and awareness. Shunning, arguing or defending and fighting has little or no power, as the real power hidden is in critical thinking to solve common good, humankind issues.   

The 200 nations, now under their own global digital spell, responding, and adjusting their own feedback and updating reality checks, influenced by the five billion, connected populace driving the world opinion.  The voices are no longer the big old-media, as they have already lost their credibility and power,  but across the world the new known and unknown big and small clusters of people sharing their thoughts amongst their local and global connectivity and surroundings. The truth rises, because this is how the critical needs for common good and social justice advances. The fabric of humankind stretches, starts to cover all nations.

Weaponization of Ideologicalism:  Why are most nations increasingly unable to control their restless citizenry? How much more will the citizens of these nations, continuously influenced by the global opinion, facing common sense, chasing truth, turning internal tribalism, into cultural wars defining limits of ideologies, as Weaponization of Ideologicalism slowly ripping local social fabric and crushing economies. Where are the repairmen, where are the solutions, which leadership is ready to articulate and bring national mobilization of entrepreneurialism as an untapped national treasure. Which nation is ready to face reality and show their advanced skills?

The aimless directives: When nations appear aimlessly drifting into hallucinations, the lack of vision, absence of social justice, unable to control internal tribalism, cultural wars move to ideological wars. Nations fragmented and splintered, now facing street by street mental wars. The visible lack of skills at the top management, lack of speed of execution at middle level and the absence of any motivation at remaining workforces now seriously limits all new options.

The coming revolution: The next global revolution, driven by economic chaos based on social failures, while the middle classes already disappeared, may not be about the mobs of commoners with broom-sticks but most likely the imploding calm and silent systemic collapse of bureaucratic administrative blockades and fall of economic intellectualism for destroying the fabric of humankind.

The absence of dialogue, only proves lack of real pragmatic solutions, skills and competence. Electioneering, sloganeering and fakery of wars to remain in power with no real economic solution, in global opinion a colossal failure.  Therefore, “Self Mastery” urgently needed to differentiate between a mesmerized mind with an enlightened one will possibly be a way to face the new challenges. Economies will only improve when old methodologies declared broken

The new world order: No other time in the history of civilization, so many globally connected will hold responsible the so few in power for destroying the remains of world order and bringing the world to a nuclear war.  A war, suggested to eliminate five billion people. It is possible, the coming revolutions to be less about anarchy but more about establishing real meritocracy. The need to search, find and strive for real value creation to answers grassroots prosperity affairs and eliminate lingering bureaucracies with fermented layers of incompetency. How soon will the five billion connected reach a critical point to select the right players with right policies and declare common good the new ultimate goals? This may eventually lead to a new world order. Pandemic was just a sneeze, economy, now like a hole in the empty pocket, leadership like a circus show, while billions looking up. Acquire mastery. Get ready for major global shifts of major economic behaviorism. The rest is easy. 

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Mosul’s recovery moves towards a circular economy



Five years since the end of the ISIL(so-called Islamic State in Iraq and the Levant) conflict in 2017, the International Organization for Migration (IOM) in Iraq and the UN Environment Programme (UNEP), with funding from the Government of Japan, has established a debris recycling centre in Mosul. After its initial use, the centre has now been handed over to Mosul Municipality for its continued, sustainable operation.

“On behalf of the Iraqi Government, the Ministry of Environment expresses its gratitude to the Government of Japan for generously supporting this important project and to UNEP and IOM for enabling the sustainable management of the huge quantities of conflict debris and restabilization of the liberated areas in an environmentally sustainable manner,” said Iraq’s Minister for Environment, Dr. Jasim Abdulazeez Humadi.

The handover of the Mosul debris recycling centre marks a significant step in the sustainable management of the huge volumes of debris — an estimated 55 million tonnes — created by the ISIL conflict. It also opens the way for the recycling of routine construction and demolition waste, contributing to ‘building back better’ and an increased circularity in Iraq’s development.

UNEP West Asia Regional Director, Sami Dimassi, emphasized that “by reducing waste, stimulating innovation and creating employment, debris recycling also creates an important business opportunity.” Indeed, construction companies in Mosul have expressed interest in purchasing the recycled aggregate, thereby underscoring the longer-term sustainability of debris recycling.

“This project supports recovery and livelihoods by drawing on principles of a circular economy, wherein waste and land pollution is limited through production processes that reuse and repurpose materials for as long as possible,” explained IOM Iraq Chief of Mission, Giorgi Gigauri. “Collaboration and sustainability are key priorities in IOM’s work toward durable solutions to displacement, and we are pleased to have partnered with UNEP and the Government of Japan so that this is represented not only in the function of the plant itself, but also in its functioning, by supporting local authorities to be prepared to effectively operate the plant moving forward.”

On 28 July 2022, Mosul Municipality hosted an event to officially hand over the debris recycling centre, attended by senior government officials and academia, as well as representatives from IOM, UNEP and the United Nations Assistance Mission for Iraq (UNAMI).

Masamoto Kenichi, Charge d’Affaires, Embassy of Japan to Iraq stated: “We are glad to know that the project funded by the government and people of Japan has contributed to cleanup of debris and reconstruction of Mosul. We would like to commend UNEP, IOM and the city of Mosul for their tremendous efforts of turning the legacy of ISIL’s devastation into building blocks of reconstruction”.

Through the rubble recycling project, nearly 25,000 tonnes of debris have been recovered and sorted, of which around half was crushed into recycled aggregate. Material testing of the recycled aggregate endorsed by the National Center for Structural Tests of the Ministry of Planning confirms its compliance with the Iraqi State Commission for Roads and Bridges design standards for road foundational layers and its suitability for several low strength end-use applications such as concrete blocks and kerbstones.

The project created 240 much-needed jobs through cash-for-work schemes targeting vulnerable persons, including 40 women.

Building on this experience, IOM has set up two other debris recycling operations in Sinjar and Hamdaniya in Ninewa Governorate, and a third in Hawija in Kirkuk Governorate, where a pilot phase using a mobile crusher was implemented in al-Buwaiter Village in 2021. In addition, two other conflict-affected governorates — namely Salah al-Din and Anbar — have  also shown a high-level of interest in replicating and scaling up debris recycling in their own regions. 

UNEP has been supporting Iraq in cleaning up the huge volumes of debris created by the ISIL conflict since June 2017. Initially, this included carrying out technical assessments and planning workshops with UN-Habitat, and subsequently designing and implementing debris recycling pilot projects to support returns in Mosul, Kirkuk and other conflict-affected areas in cooperation with IOM.


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Digital Futures: Driving Systemic Change for Women



Authors: Erin Watson-Lynn and Tengfei Wang*

As digital technology continues to unlock new financial opportunities for people across Asia and the Pacific, it is critical that women are central to strategies aimed at harnessing the digital financial future. Women are generally poorer than men – their work is less formal, they receive lower pay, and their money is less likely to be banked. Even when controlling for class, rural residency, age, income, and education level, women are overrepresented among the world’s poorest people in developing countries. Successfully harnessing digital technology can play a key role in creating new opportunities for women to utilise formal financial products and services in ways that empower them. 

Accelerating women’s access to the formal economy through digital innovations in finance increases their opportunity to generate an income and builds resilience to economic shocks. The recently issued ESCAP guidebook titled, Harnessing Digital Technology for Financial Inclusion in the Asia Pacific, highlights the fact that mechanisms to bring women into the digital economy are different from those for other groups, and that tailored policy responses are important for women to fully realise their potential in the Asia-Pacific region.

Overwhelmingly, the evidence tells us that how women utilise their finances can have a beneficial impact on the broader community. When women have bank accounts, they are more likely to save money, buy healthier foods for their family, and invest in education. For women who receive Government-to-Person (G2P) payments, there is significant improvement in their lives across a range of social and economic outcomes. Access to safe, secure, and affordable digital financial services thus has the potential to significantly improve the lives of women.

Despite the enormous opportunity, there are numerous constraints which affect women’s access to financial services. This includes the gender gap in mobile phone ownership across Asia and the Pacific, lower levels of education (including lower levels of basic numeracy and literacy), and lower levels of financial literacy. This complex web of constraints means that country and provincial level diagnostics are required and demands agile and flexible policy responses that meet the unique needs of women across the region.

Already, across Asia and the Pacific, governments are implementing innovative policy solutions to capture the opportunities that come with digital finance, while trying to manage the constraints women often face. The policy guidebook provides a framework to examine the role of governments as market facilitators, market participants and market regulators. Through this framework, specific policy innovations drawn from examples across the region are identified which other governments can adapt and implement in their local markets.  

A good example of how strategies can be implemented at either the central government or local government levels can be found in Pakistan. While central government leadership is important, embedding tailored interventions into locally appropriate strategies plays a crucial role for implementation and effectiveness. The localisation of broader strategies needs to include women in their development and ongoing evaluation. In the Khyber Pakhtunkhwa province, 50,000 beneficiary committees comprising local women at the district level regularly provide feedback into the government’s G2P payment system. The feedback from these committees led to a biometric system linked to the national ID card that has enabled the government to identify women who weren’t receiving their payments, or if payments were fraudulently obtained by others.

In Cambodia and the Philippines, governments have implemented new and innovative solutions to support remittance payments through public-private-partnerships and policies that enable access to non-traditional banks. In Cambodia, Wing Money has specialised programs for women, who are overwhelmingly the beneficiaries of remittance payments. Creating an enabling environment for a business such as Wing Money to develop and thrive with these low-cost solutions is an example of a positive market intervention. In the Philippines, adjusting banking policies to enable access to non-traditional banking enables women, especially those with micro-enterprises in rural areas, to access digital products.

While facilitating participation in the market can yield benefits for women, so can regulating in a way that drives systemic change. For example, in Lao People’s Democratic Republic and India, different mechanisms for targets are used to improve access to digital financial products. In Lao People’s Democratic Republic, the central government through its national strategy, introduced a target of a 9 per cent increase in women’s access to financial services by 2025. In India, their targets are set within the bureaucracy to incentivise policy makers to implement the Digital India strategy and promotions and job security are rewarded based on performance.

These examples of innovative policy solutions are only foundational. The options for governments and policy makers at the nexus of market facilitation, participation and regulation demands creativity and agility. Underpinning this is the need for a baseline of country and regional level diagnostics to capture the diverse needs of women – those who are set to benefit the most of from harnessing the future of digital financial inclusion.

*Tengfei Wang, Economic Affairs Officer

This article is the second of a two-part series based on the findings of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) Policy Guidebook: Harnessing Digital Technology for Financial Inclusion in Asia and the Pacific, and is jointly prepared by ESCAP and the Griffith Asia Institute.source: UNESCAP

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