From four aspects, the reason why the Japanese yen has become the third largest currency for foreign exchange transactions

As the largest and strongest economy in the world, the United States has the hegemony of the dollar and holdsforeign exchangeThe first transaction goes without saying;Euro as19It is understandable that the currency shared by countries ranks second.

While Japan's economy has been sluggish for a long time, why can its currency yen become the third largest trading currency in the international foreign exchange market and remain prosperous?

The large economic power, large-scale foreign trade and free and open financial market have laid the foundation for the yen to become the third largest in the worldForeign exchange transactionsThe basis of money,The stability of currency value makes yen a high-quality financial asset, which is favored by investors when risk aversion is high, and the low cost of capital is the main factor to promote the structural prosperity of yen trading.

The Japanese Yen Becomes the Economic Basis of International Transaction Currency

Under the international credit standard system, based on the universality of monetary functions, the currencies of various countries in the world can generally be divided into non convertible currencies, conditionally convertible currencies, freely convertible currencies, international currencies and international standard currencies5Types.

As long as a country abandons foreign exchange control, its currency will naturally become a freely convertible currency, but not any freely convertible currency can become an international currency. Only a freely convertible currency of a large country can become an international currency, and at least the following two conditions must be met: first, it has a large scale of foreign transactions, and second, foreign transactions account for a relatively moderate proportion of the total domestic economy.

To sum up, under the international credit standard system, the basic conditions for becoming an international currency are: a large country, a large scale of foreign transactions, and a moderate degree of dependence on foreign countries.

First, Japan is an economic power.

From the defeated country in the Second World War to becoming the world's second largest economy, Japan's economy experienced a period of post-war revival and rapid growth.1956Year to1978For more than 20 years, except1958In addition to the low annual growth rate, Japan has maintained double-digit economic growth in other years, and even reached20%Nominal growth rate.

After more than 20 years of sustained economic growth, Japan's GDP has successively overtaken that of France and Britain,1968In, it surpassed the Federal Republic of Germany and became the second largest economic country among capitalist countries after the United States.

1987In, Japan's foreign exchange reserves exceeded that of the Federal Republic of Germany, ranking first in the world;1988Japan's per capita income in1.9US $10000, slightly higher than the United States, with Japan occupying the top 30 companies in the world22And included the top ten commercial banks in the world. Japan has occupied the second place in the world economy for a long time40For the rest of the year, until2010In, it was overtaken by China and retired to the third place in the world economy.

If the gross national product（GNP）By comparison, the difference between the total economic output of China and Japan is greater than the GDP（GDP）It should be smaller;In per capita terms, there is still a considerable gap between China and Japan.

Although Germany's economic scale is catching up2017It has not surpassed Japan in. In short, as a world economic power, Japan has laid the economic foundation for the yen to become an international currency, which is beyond doubt.

Second, Japan's foreign trade is huge.

The scale of foreign transactions is mainly composed of foreign trade and international investment. As a large foreign trading country, its currency is easily accepted by foreign trading partners, which is an easy to understand fact, that is, the "universal acceptance" of currency at home overflows overseas, forming the "universal acceptance" of the world.

From Tibet Province of Japan to1985The first report on the internationalization of the yen was released in2003In, Japan has always maintained its position as the third largest country in world trade. During this period, the important reason why the Federal Republic of Germany was able to occupy the second largest country in world trade was that Germany, as a member of the European Union, enjoyed the benefits of trade creation and trade transfer.

1985In, Japan's imports and exports accounted for6.48%and9.07%, second only to the United States and the Federal Republic of Germany,2004Since,With the development of China's foreign trade, Japan's foreign trade ranked fourth,2017The proportion of the annual foreign import and export volume in the world's import and export volume is3.72%and3.94%。

Last century80Since the mid-19s, Japan has begun to export capital overseas on a large scale,1990Japan became the largest creditor country in the world in, and its status as a net creditor country has not been shaken up to now2017At the end of the year, Japan had foreign net assets of up to29090USD100mn

Japan's overseas investment mainly takes the form of acquiring foreign enterprises and investing in foreign securities. It receives huge dividends and interests from overseas every year. As a world trade power and an international investment power, Japan's currency, the Japanese yen, is universally accepted internationally.

Third, appropriate dependence on foreign trade.

A country's foreign transactions account for too much of its economy, that is, its dependence on the external economy is too strong, which means that its economy is greatly affected by external economic fluctuations. The country's monetary authority may be conservative about the international use of its currency, the free cross-border flow of capital, etc., which is detrimental to the internationalization of the currency.

The index of foreign trade dependence can better reflect the internal and external balance of a country's economy, and reflect the ability of a country's economy to withstand the impact from the external economy,Generally speaking, the higher the index, the higher the sensitivity of the country's economy to external economic changes.

In the big economy, although there is a saying that Japan is a country based on trade, and Japan's foreign trade is huge, its foreign trade dependence index has always been kept in a more appropriate range.

As a world economic and trade power, Japan's trade dependence is not significantly higher than that of the United States,From the perspective of aggregate, it can be concluded that Japan's tolerance for the impact of external economic volatility is similar to that of the United States.Although structural factors are not considered here, Japan's dependence on foreign trade is generally considered to be moderate, supporting the yen to become an international currency.

Financial Opening Makes Japanese Yen the Main Currency for International Foreign Exchange Transactions

International experience shows that the normal order of currency internationalization is to evolve from non convertible currency to conditionally convertible currency, realize the free exchange of currency through the liberalization of capital account, and then gradually be accepted by the international community and grow into international currency.

Of course, deregulation can become a freely convertible currency, but not all freely convertible currencies can become international currencies; Only the currency of a large country can become an international currency, and the currency of a small country cannot become an international currency even if it is highly liberalized. The development path from non convertible currency to international currency is essentially a process of financial liberalization, which is also fully illustrated by the growth of the Japanese yen.

According to the International Monetary Fund（IMF）According to Article 8, IMF member states shall exercise the freedom of exchange under the current account and non discriminatory multilateral freedom of exchange for transactions under the current account. If a member state does have a fundamental imbalance in its balance of payments, it may invoke the provisions of paragraph 2 of Article 14 of the International Monetary Fund and temporarily fail to perform its obligations under Article 8.

For transactions under financial and capital accounts, there is no clear requirement for exchange liberalization.Japan on1964The exchange liberalization under the current account was implemented in, and the yen became the eighth article country of the International Monetary Fund. Naturally, the yen also became a conditionally convertible currency from a non convertible currency.

The exchange freedom of the current account and the exchange control of the capital account will inevitably result in the cross-border flow of funds through the current account through the transactions under the capital account. The game between the management authority and the market is often to control the good and make the bad cheap. Therefore, theoretically speaking, after realizing the freedom of exchange under the current account, the freedom of exchange under the capital account should be promoted quickly. However, Japan is quite conservative in this regard.

until1983In, Reagan, then President of the United States, extended the opening requirements for Japan in the trade field to the financial capital field and promoted the establishment of the "Japan US Yen US Dollar Committee", which opened the curtain of Japan's financial liberalization.

1984year5In January, the committee released the Report of the Japan US Yen US Dollar Committee,The current situation and prospects of financial liberalization and yen internationalization were released by the Ministry of Finance of Japan;1985year3In June, the Foreign Exchange Review Committee under the Ministry of Tibetan Affairs issued the Defense on the Internationalization of the Japanese Yen based on the previous two reports.

Since then, the Japan US Yen US Dollar Committee (later renamed the "Japan US Financial Market Working Group") has conducted several rounds of negotiations,1991In, a series of agreements were reached on Japan's opening of financial markets and financial liberalization.1993In, the group discussed issues such as market access and financial derivatives. It would be naive to think that the above-mentioned official actions of the United States and Japan are to promote the internationalization of the yen.

Many Japanese financial people believe that for a long time,The Japanese official talk about the internationalization of the yen is only superficial. In fact, it is an attempt to maintain the old domestic financial order,The main purpose of the United States is to open the door of the Japanese financial market, so that American banks can enter the Tokyo market on a large scale.

On the issue of yen internationalization, the United States and Japan are surprisingly consistent, that is, "yen internationalization can be done slowly". from1985In, the Foreign Exchange Review Bureau of Tibet Province of Japan issued the Defense on the Internationalization of Japanese Yen until1998Before the "big bang financial reform" in,Although Japan has also taken many measures to promote the internationalization of the yen, it has mainly opened its financial market,We will continue to promote the reform of "transparency, fairness and justice" in the financial market and achieve financial liberalization and opening up.

From the practical effect, the internationalization of yen is the product of financial liberalization and financial openness. The Asian financial crisis and the advent of the euro have greatly stimulated Japan. During the Asian financial crisis, Japan put forward the "New Miyazawa Concept", participated in the Chiang Mai Agreement, and the Japanese academic community talked about the Asian dollar, emphasizing the position of the Japanese yen in the future Asian dollar. It can be said that1999Around the year, Japanese officials and media showed unprecedented enthusiasm for the internationalization of the yen.

1998year12In September, Japan launched the Measures for Promoting the Internationalization of the Japanese Yen,1999year4Monthly release of21Internationalization of the Japanese Yen in the 21st Century -- Response to Changes in the World Economic and Financial Situation,It proposed to rectify the environment and devote to the active use of yen in order to promote the internationalization of yen5Measures.

In a sense,1983—1997In, Japan mainly promoted the internationalization of the yen by promoting financial liberalization and opening up1998In the process of promoting financial liberalization, Japan completely abolished foreign exchange control, and promoted the regionalization and internationalization of the yen.

The most essential content in the process of yen internationalization is to continuously promote financial liberalization and financial opening, so as to achieve the internationalization of yen and become the main international transaction currency.1985The important effect of continuously promoting financial liberalization since is that Tokyo has become a highly developed international and liberalized international financial market.

Tokyo once became the world's third largest foreign exchange trading center, and is now the fifth largest foreign exchange trading center; Japan's foreign exchange margin trading accounts for the world1/3, is the world's largest foreign exchange margin market; Tokyo is also the world's second largest securities market after New York. International investors can exchange yen assets and other monetary assets smoothly, which makes yen assets have high international liquidity.

The free flow of capital endows the yen with universal international acceptance

The currency of a country can be widely traded in the international foreign exchange market, and the free cross-border flow of currency, especially the unimpeded flow of currency overseas, is a necessary condition. Import settlement, overseas investment, and non resident financing are all channels for local currency to flow overseas, and the flow of yen in these channels is free and smooth.

First, trade settlement currency.

For international currencies, domestic currency settlement for imports and exports is an important channel for currency outflows and inflows,The settlement of imports in local currency leads to the flow of money overseas, which is also a prerequisite for the currency to be used as the transaction currency in the international foreign exchange market.

For a long time, the proportion of Japanese yen used in Japan's imports and exports has been relatively low,2000Before and after, the proportion of Japanese imports and exports settled in yen was about24%and35%, and American81%and92%, German51%and73%British40%and52%By comparison, the proportion of Japanese yen used in the domestic import and export settlement is relatively low, the import and export balance, and the outflow of Japanese yen from trade channels is less than the inflow, indicating that the contribution of trade to the flow of Japanese yen overseas is negative.

According to the statistics of the Ministry of Finance of Japan,2018The proportion of Japanese yen used in import and export in23.7%and36.7%, the proportions of using US dollars are69.8%and50.4%That is to say, the clearing currency used in Japan's foreign trade is more US dollars than Japanese yen. From the perspective of net value, trade settlement did not promote the flow of yen overseas, and played a role in the return of yen. The situation of intangible trade is difficult to judge due to the lack of data.

The proportion of Japanese yen used in foreign trade settlement is obviously lower than that of western countries such as Germany and Britain. As mentioned in this article, this phenomenon has attracted the attention of economists. However, this has not hindered the status of the yen as a major currency for international foreign exchange transactions.

The currency for international transactions refers to playing a role in the three sub sectors of trade settlement, international lending and international foreign exchange transactions. The proportion of Japanese yen used in trade settlement is relatively low. However,It plays an important role in international lending, especially in international foreign exchange transactions, which is also an important feature of Japanese yen as the currency of international transactions.

Second, direct investment and securities investment.

Japan's overseas investment can be divided into two parts: direct investment and securities investment. Last century80In the mid s, Japan became a major capital exporter, especially after the Plaza Accord. With the continued substantial appreciation of the yen, the Japanese economy underwent profound changes, and Japanese capital poured overseas.

As can be seen from direct investment,1985Since,in especial2008After, the scale of overseas investment has reached hundreds of billions of dollars every year, and the net amount of overseas direct investment minus overseas direct investment in Japan is also hundreds of billions of dollars,2011The annual net direct investment is1093.75USD100mn2017Year is1500.20USD100mn

In addition, Japan's investment in overseas securities is also expanding year by year,1996Up to1111650100 million yen,2000Year is1501150100 million yen2005Year is2494930100 million yen2015Year is4233140100 million yen2018Year is4508440100 million yen.

Although the net amount of foreign investment cannot be simply understood as the net amount of yen outflow, nor can the overseas securities investment be directly understood as the outflow of yen,There is no doubt that Japan's capital export drives the yen to flow overseas and drives the yen's foreign exchange transactions.

Third, European yen bonds, namely offshore yen bonds.

European yen bonds are offshore bonds. In the last century80Since the s, European yen bonds have generally existed tepidly from their inception to their development,1987Issued annually16Total amount of raised funds5200100 million yen;1991Reached its peak in174Pen, raising up to32883100 million yen; In the past five years11000100 million to16000100 million yen.

Although it is difficult to determine that the issuance of European yen bonds must be the outflow of Japanese capital,However, to some extent, it can explain the capital output of Japan and the activity of Japanese yen in the international foreign exchange market.

Fourth, yen foreign bonds, that is, bonds issued by non residents in the Japanese market.

Last century80In the late s, non residents began to issue bonds in Japan to raise funds. There are two types of bonds issued by non residents in Japan: bonds denominated in foreign currencies and bonds denominated in yen. Whether denominated in yen or not, they all reflect the outflow of funds in Japan.Bonds denominated in yen reflect not only the outflow of funds, but also the outflow of yen.

according towindData in the database,1987Non residents issued bonds denominated in foreign currencies in the Japanese market in8Pen1332Yen 100 million, bonds denominated in Yen25Pen4975100 million yen, total33Pen6307100 million yen. After nearly ten years of development, the market scale has gradually expanded,1996Foreign currency denominated bonds issued in106Pen26125Yen 100 million, bonds denominated in Yen57Pen13212100 million yen, total163The number of bonds issued is up to49337100 million yen.

Since then, due to various reasons, the scale of bond issuance has fluctuated greatly every year. However, the Tokyo market has matured as a bond market for non residents to raise funds,2014The annual bond issuance scale is as high as50283Billion yen, the peak of the annual bond issuance since the establishment of the market. The foreign bond market in Tokyo is not only a part of the international financial market in Tokyo, but also plays a role in capital export and yen outflow, making positive contributions to the prosperity of yen foreign exchange transactions.

Arbitrage and safe haven currencies increased yen foreign exchange trading volume

According to the survey of the Bank for International Settlements, foreign exchange transactions due to actual economic needs account for about5%, the rest95%The foreign exchange transactions in the foreign exchange market are financial transactions. Arbitrage transactions and hedging transactions are important financial transactions in the foreign exchange market.

Japan's low interest rate and lowCPIThe yen has become an arbitrage currency and a safe haven currency, thus increasing the trading volume of yen in the foreign exchange market.After Japan's foam economy burst1993It entered the era of low interest rates in.

At a rediscount rate that roughly reflects the interest rate basis of a country,1995Japan in0.50%, the United States is5.25%, It's Japanese10Multiple;2001The rediscount rate in Japan was lowered to0.10%, the United States is1.33%, Eurozone is4.00%；2006In, the rediscount rate in Japan was raised to0.40%, the United States was promoted to6.25%, Eurozone is4.50%；2008The rediscount rate in Japan was lowered to0.30%, the United States is0.50%, Eurozone is3.00%。

Japan has kept interest rates at0.3%Within the scope of,2016In, it even introduced a negative interest rate policy to charge interest on excess reserve deposits. The extremely low interest rate of the yen gives people no lower expectations, making the yen the main arbitrage currency. Japanese yen investors borrow Japanese yen at a very low price, exchange it for other high interest assets, or purchase high-income risky assets. After the loan matures, they sell foreign exchange, buy back Japanese yen, and repay the loan. All these activities will constitute foreign exchange trading volume.

Although the interest rate of the yen is extremely low, its value is stable. By consumer price index（CPI）The change of monetary purchasing power reflected in the Japanese yen is also the most stable among the major international currencies. from1990Year to2018Nearly30In the middle of the yearCPIThe measured price level of Japan rose very little2010The base period is to2018Year,CPIThe increase is only4.98%It can be seen that the value of yen is extremely stable.

Under the credit monetary system, foreign exchange is an asset. The stability of its value indicates the quality of the asset. When the private sector holds foreign exchange assets, it first considers the stability of its value. Japanese yen assets just meet the conditions for the private sector to hold foreign exchange assets. The Japanese yen that can be obtained and used everywhere caters to the preference of the private sector for holding Japanese yen assets.

The appreciation of foreign exchange assets is an important reason for foreign exchange transactions. From the perspective of the microstructure of the foreign exchange market,The change of risk appetite is one of the important reasons for foreign exchange transactions. Foreign exchange transactions lead to changes in exchange rates, which will lead to a new round of foreign exchange transactions.

Especially when algorithmic trading has changed from quantitative trading to high-frequency trading, and has increasingly become the main trading mode in the foreign exchange market, frequent financial transactions of stock foreign exchange have become the mainstream of foreign exchange trading, which has little to do with the actual demand for foreign exchange in foreign economic and trade activities. The Japanese yen is held as a high-quality asset and traded frequently in the foreign exchange market, which is one of the important reasons why the Japanese yen is traded on a large scale in the international foreign exchange market.

The United States and the euro areaCPIAre much higher than Japan2010Year is the base period,2018Year:115.16%、111.01%If the time is longer, we can see thatCPIThe increase was even greater.

因此，比较而言，日元的价值稳定性强于美元和欧元。价值坚挺的货币容易成为避险货币，世界经济和政治的风吹草动，就可能有资金流入日元，把日元作为避风港，避险性交易也是推动日元外汇交易的重要力量。

2007年美国次贷危机爆发后，大量避险性需求推升了日元外汇交易，美元兑日元持续大幅贬值，从2007year7Of123Japanese yen/美元，下跌到2011year12Of76Japanese yen/美元，下跌幅度高达38%。

低利率和低CPI对于套利交易和避险交易具有相互促进的作用。低利率刺激了借入，通胀率低的货币使借入者对未来汇率变动的预期偏向乐观，从而增强了借入的积极性，套利交易更趋活跃。

同理，基于避险动机的交易者可以通过借入日元达到避险的目的，也可以通过互换等金融衍生工具达成避险的目的。总之，一个低利率的货币成为套利货币的基础是价值稳定，一个价值稳定的货

币成为套利货币的条件之一是与其他货币之间存在利差，同时具备价值稳定和低利率的货币是最佳的套利货币，也是最佳的避险货币。日元恰好符合这些条件而成为国际外汇市场上的套利货币和避险货币。