Japan Wants to Attract Tourists to Boost the Yen, JPY Traders are Concerned about Further Japanese Intervention

Japan is receiving more visitors. Beginning on Tuesday, individual travelers will be able to enter Japan without a visa, precisely like it was before COVID-19, and electronics shops, airlines, and tourism attractions have high hopes for a resurgence of their industries. The Japanese government is attempting to support the yen in this way. Investors are starting to indicate that any further support measures taken by Japan for the beleaguered currency would have a smaller impact than they did previously.

Even as the currency pair closes above 145.90, the level that prompted a near $20 billion intervention by Japan's Ministry of Finance, one-week-high volatility in the dollar-yen has dropped to trade considerably below highs observed last month. The longest losing stretch since May for the Japanese yen has been eight weeks. Traders of the yen are also anticipating important US inflation data scheduled on Thursday. The yen fell due to last month's CPI reading, which increased expectations for aggressive rate increases from the Federal Reserve going forward.

Japan's currency has lost more than 20% of its value versus the US dollar so far this year as a result of its expanding monetary policy gap with the US. On September 22, it reached 145.90 to the dollar, prompting Japanese intervention. Selling short-dated US commodities like T-Bills allowed the Finance Minister to most likely fund the intervention from last month. 

For the most of the pandemic, Japan kept its borders closed to most visitors from abroad. Since June, only pre-arranged trips have been permitted. In the meantime, the yen has dropped significantly against the dollar, offering some tourists considerably greater purchasing power and making Japan practically unaffordable for those looking for deals. Before the pandemic, 32 million foreign visitors traveled to Japan in 2019. At that time, the travel and tourism industry made up over 7% of Japan's GDP. According to estimates, foreign visitors contribute about 5 trillion yen ($35 billion) to the Japanese economy.