The Land of the Rising Sun may be 8000km away, but huge calls from the Japanese government in recent days are already starting to affect everyday Aussies.<\/p>\n
The Australian dollar shot up in value by 0.67 per cent towards the end of last week to its highest weekly close in seven weeks \u2014 driven by two major macroeconomic calls.<\/p>\n
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While the war in Iran has weighed heavily on the global economy, a prominent economic commentator said Aussies \u2014 particularly those with a mortgage \u2014 can \u201cno longer ignore\u201d what\u2019s happening in Japan.<\/p>\n
He said one of the biggest influences on where rates go next may not be in Australia at all, as the world digests what the nation of 122 million does as its currency sits at its weakest level since 1986. <\/p>\n
Why everyone is watching Japan<\/p>\n
There have been a series of big calls made in Japan in recent days that have sent shockwaves around the world.<\/p>\n
US President Donald Trump on Sunday confirmed that the United States had intervened to support the Japanese yen, calling the move a \u201csignal of friendship\u201d that would financially benefit the US and world economy. <\/p>\n
The Financial Times reported on Friday that the US Treasury had jointly intervened with Japan to prop up the yen for the first time in nearly three decades. <\/p>\n
Asked aboard Air Force One why the US was moving to support Japan\u2019s currency, Mr Trump said, \u201cBecause we have a good relationship with Japan.\u201d <\/p>\n
The US will see \u201cfinancial benefit\u201d from the move and \u201cit\u2019s also good for the world economy,\u201d Mr Trump insisted, but \u201cit was really more than anything else, it was a signal of friendship\u201d. <\/p>\n
\u201cWe\u2019re very strong \u2014 very, very strong financially. They are, you know, they have a weakening yen, and they wanted a little bit of help. And we\u2019re always there for Japan. Japan\u2019s been very good to us, with the exception, of course, of Pearl Harbour,\u201d the President said. <\/p>\n
The Financial Times reported, citing people familiar with the matter, that the Federal Reserve Bank of New York had taken the unusual step of selling euros to buy yen on behalf of the US Treasury on Friday. <\/p>\n
The intervention came after the yen slid to 163.24 per dollar last month, its weakest level since 1986, as higher US interest rates, rising oil prices and persistent capital outflows weighed on the currency. <\/p>\n
Washington\u2019s move came as the yen rebounded sharply last week, fuelling speculation that Japanese authorities had also intervened in currency markets. <\/p>\n
Analysts cited by the Financial Times estimated Japan\u2019s intervention may have totalled about 8.45 trillion yen ($75 billion). <\/p>\n
According to the Financial Times, the move would be the first co-ordinated US-Japan effort to support the yen since 1998.<\/p>\n
Aus dollar shoots up, mortgage-holders told to pay attention <\/p>\n
The news immediately sent the value of the Australian dollar on an upward climb on Friday.<\/p>\n
Tony Sycamore, a market analyst at IG, said the spike was driven by the deal between the US and Japan.<\/p>\n
\u201cHistorically, co-ordinated intervention has been reserved for crisis periods, so the willingness of US and Japanese authorities to act together under current conditions was largely unexpected and reflects a stronger-than-expected commitment to curbing excessive yen weakness,\u201d he said. <\/p>\n
\u201cThe action pushed the yen to its strongest levels since early May and contributed to broad big dollar softness that supported the Australian dollar. A late-week rebound in global equities and risk sentiment provided an additional tailwind for the Aussie dollar.\u201d<\/p>\n
Wealth Within\u2019s chief analyst and founder, Dale Gillham, said the Bank of Japan\u2019s recent decision to lift interest rates could affect Aussie investors and the RBA here at home.<\/p>\n
\u201cMost Australians are focused on the Reserve Bank and what it will do next with interest rates,\u201d he said. \u201cEvery inflation report and jobs number sparks a fresh round of predictions about whether rates are going up, down or staying put. However, one of the biggest influences on where rates go next may not be in Australia at all. It could be nearly 8000km away in Japan.<\/p>\n
\u201cFor decades, Japan\u2019s ultra-low interest rates encouraged its biggest pension funds, insurers and banks to invest overseas in search of better returns and Australia was one of the biggest beneficiaries. Japanese investors became major buyers of Australian government and bank debt, helping fund our financial system. In fact, Japan has been the single largest foreign investor in Australian fixed income by country for many years.<\/p>\n
\u201cThat picture is now starting to change. The Bank of Japan has lifted interest rates to their highest level in decades. As returns improve at home, Japanese investors have more reason to keep their money in Japan rather than investing overseas.\u201d<\/p>\n
He said this matters because Australia relies heavily on foreign investors to help finance its bond market. <\/p>\n
\u201cIf Japanese investors buy fewer Australian bonds, demand falls. When that happens, bond yields generally rise, making it more expensive for governments and banks to borrow,\u201d he said. \u201cThose higher funding costs can eventually flow through to businesses, home loans and the wider economy.<\/p>\n
\u201cWhat happens next depends partly on Japan. If the Bank of Japan keeps raising interest rates, more Japanese capital could stay at home or flow back. That could keep upward pressure on Australian bond yields and make it harder for borrowing costs in Australia to fall, even if the Reserve Bank starts cutting the cash rate.<\/p>\n
\u201cUltimately, Japan won\u2019t decide Australia\u2019s interest-rate future on its own. Inflation, wages and the domestic economy will still be the biggest drivers, but Japan has quietly become another important piece of the puzzle, and it\u2019s one Australians can no longer afford to ignore.\u201d<\/p>\n
Fuel prices surge in double whammy for Aus<\/p>\n
Another global issue Australians are finding hard to ignore is the fuel crisis.<\/p>\n
Petrol prices have spiked on Monday morning after the federal government\u2019s temporary fuel excise relief expired, while drivers were also hit with a new inflation adjustment at the pump.<\/p>\n
Fuel excise was temporarily reduced on April 1 from 52.6 cents a litre to 20.6 cents a litre, a 32 cents per litre discount to wholesale fuel prices.<\/p>\n
The Albanese Government then partially extended the relief to August 2, albeit reducing the discount at the pump to 16 cents a litre.<\/p>\n
But that relief ended at midnight on Sunday, and on Monday, petrol and diesel were also slapped with a tax hike from 36.6 cents per litre to 53.7 cents per litre as part of their twice-yearly inflation indexation. <\/p>\n