2. Under the background of excess market liquidity, the global economic recovery has provided support for risky assets, thus dragging down the exchange rate between the Japanese yen and the US dollar. The dollar is expected to be weaker than the yen, so although the dollar/yen may fall, the yen is expected to be weaker because the cross exchange rate of the yen is higher. However, in view of such a major natural disaster, the risk tolerance of Japanese investors is bound to decline. Therefore, the yen will become a relatively strong currency, because it is expected that there will be foreign exchange hedging against foreign assets and the sale of foreign assets in the coming months to make up for the earthquake losses. As mentioned earlier, this impact will not appear immediately like the 1995 earthquake, and we may even see the yen depreciate in the next few days. However, we believe that the risk of yen appreciation will increase in the coming months. Last June, 5438+065438+ 10, the bullish view of the yen for three years changed to bearish yen (although the dollar will still be weaker than the yen, which will lead to the decline of the dollar/yen). However, we now predict that the yen may become the strongest currency in the coming months. We expect that the appreciation of the yen will not only appear on the dollar against the yen, but also on other cross-exchange rates of the yen. If the strong yen causes the Nikkei to drop sharply, the Japanese Ministry of Finance/Bank of Japan may intervene in the market.
3. It may lead to the further deterioration of Japan's public debt, and the increase of government expenditure is inevitable, but it will not lead to selling the yen.