The risk aversion of the yen mainly comes from Japan's geographical attributes, economic strength, monetary attributes and monetary policies.
First, as an island country, Japan is not easily affected by political, war, market fluctuations and other factors, and can avoid the risk of depreciation to the maximum extent.
Second, as a developed country, Japan has a reasonable economic structure, a mature economy and a complete financial system. In a word, Japan's strong economic strength provides a foundation for the stability of the yen's value. More importantly, Japan has foreign exchange reserves second only to China.
Japanese yen is a freely circulating currency.
Fourth, the yen is a low-interest currency, which is the most direct reason why the yen has become a safe-haven currency. When the economy fails, it is necessary to cut interest rates to stimulate the economy. When cutting interest rates, it is relatively uneconomical to hold money, and the interest rate cut is expected. The exchange rate of high-interest currencies is suppressed, and low-interest currencies have a hedging effect. Japan's interest rate has been low for a long time and there is no way to reduce it. In times of crisis, other countries' currencies may depreciate by cutting interest rates, and the yen is unlikely to cut interest rates, so the yen will hedge.
(1) When the risk aversion in the market is high, the most direct reactions are often: selling stocks (the stock market falls), recovering loans (the dollar and the yen rise), and holding cash and high-security bonds (the price of US Treasury bonds rises and the yield falls). One of the reasons behind the rise of the dollar and the yen caused by the recovery of loans is the rapid expansion of arbitrage transactions in recent years. Since both the Japanese yen and the US dollar have become currencies with almost zero interest rates, many speculators seeking higher returns often borrow the Japanese yen and the US dollar and convert them into other currencies with higher yields for investment. However, once in trouble, these speculators will often take the initiative or be forced to liquidate arbitrage transactions, sell related currencies, and buy dollars and yen to repay loans, resulting in an increase in the exchange rate of dollars and yen. Among them, the yen carry trade has a longer history and a larger scale, so the yen exchange rate tends to rise more. Since buying yen is mostly a passive liquidation transaction to avoid market risks, it may be more appropriate to call it "hedged".
(2) Japan's low interest rate makes the yen the currency with the lowest financing cost in the world. Therefore, when there are investment opportunities outside Japan, investors with high credit and excellent vision can easily obtain huge and cheap yen assets from Japan, and the yen is a freely convertible currency, so it can be easily converted into other currencies, and then put the funds into their favorite projects. Simply put, if the global economy is improving and there are a lot of investment opportunities, the process of integrating into the yen and investing in other markets can be regarded as selling yen to buy other currencies, which should push down the yen exchange rate. This process may determine the duration of yen weakness and the number of investment opportunities. But once the investment loses money or the global economy faces problems, the investment opportunities outside Japan begin to shrink. At this time, these investors who lend yen can only take profits or stop losses, exchange the remaining currency in their hands for yen and return it to Japan. This process is simply to sell other currencies and buy yen, which will of course push up the yen exchange rate. This is similar to the one above.
(3) Japan is the world's largest net creditor, and it has been the world's largest net creditor for the 23rd consecutive year since 199 1. By the end of 20 13, the overseas net assets of Japanese government, enterprises and individuals after deducting liabilities were 325 trillion yen, an increase of 9.7% over the end of last year. Among the overseas assets, most of them are privately held foreign direct investment and indirect investment (financial market investment), except the government's foreign exchange reserves exceeding 654.38 trillion US dollars. Therefore, once the international financial market is in turmoil, Japanese funds will tend to withdraw funds from China for the preference of their home countries, which will lead to the appreciation of the yen.