Japan's economy is hardly in ship shape, so why do people keep flocking to the yen when markets take a dive like they did after Brexit? Graham Mackay reports.
Negative interest rates, massive public debt and an ageing population. Hardly signs of a thriving economy... But when global markets tank like they did when Britain voted to leave the EU last weak - investors look to Japan... specifically its currency. SOUNDBITE (English) TONY MONROE, REUTERS, TOKYO, SAYING: "The Japanese currency is a safe haven in rocky markets because it is seen to have little downside risk." Pause there for a second. Downside risk means the potential for something to lose it's value if conditions turn sour... In other words - investors are generally confident that the yen will hold its worth. SOUNDBITE (English) TONY MONROE, REUTERS, TOKYO, SAYING: "What happens when markets get jittery is that Japanese companies and investors with funds overseas begin to bring some of that money back, pushing up the yen. At the same time, foreign investors looking for shelter also buy into the Japanese currency. Another factor that can drive up the yen is the carry trade. That's when investors borrow cheap yen to make riskier investments elsewhere. And when the market turns, they need to repay their yen loans and that in turn pushed up the currency." Investors ploughing their money into the yen may sound like a good thing... But it's actually a major headache for Tokyo... In fact, it was the main reason why Japanese stocks dropped 8 percent after the Brexit vote. A strong currency is bad for exports - which are central to Japan's fragile economy. Making matters worse... there's not a lot the government can do to shore things up. Intervention is an option, but analysts say that will only slow the rise of the currency - not force it down. And as long as global markets remain volatile... the only way is up for the yen.