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Dollar/yen may be hit by Japan's export drive

7 Comments

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if anyone figures out what this article is saying please let me/us know...

7 ( +7 / -0 )

Your guess is as good as mine. It just kinda rambles on without a clear concise post. The info is pretty accurate though.

4 ( +4 / -0 )

Based on the final paragraph it appears as if both yen and dollar are falling because market players are selling them both off. Question is, what are they buying instead?

1 ( +1 / -0 )

In a nutshell: Countries will do what they can to stimulate their economies regardless of what any treaties they have may say. Always have and always will. One of the best ways to stimulate the economy is to make exports look good to foreign countries. One of the best ways to do THAT is to change the exchange rate of the two currencies in question to make the exporting country's good appear cheaper.

1 ( +1 / -0 )

Japan does not have much options. To pay for imports it must export. It is a matter of survival, a fact of life clearly understood in Japan.

0 ( +0 / -0 )

@Reckless

I think it's saying the currency range is expected to remain steady for the next year or longer.

0 ( +1 / -1 )

Currency traders are looking at what the big Japanese exporters are doing so as to determine what direction the exchange rate will take. There has been some uncertainty because Abe and the BOJ had aimed for a exchange rate goal of 120 yen per dollar. This seemed reasonable as the rate was 130 yen per dollar 6 or 7 years ago.

But it is obvious now that 120 yen per dollar will not be reached, at least not anytime soon, and that the yen will likely grow in value against the dollar slightly in the coming months, despite the FED tapering it's easing policies. Tapering should have seen a further decrease in the value of the yen, as fewer dollars were being printed.

This indicates a lack of faith in the "recovery" of the American economy, at least in the near term. This is puzzling to many because the situation in Japan is particularly dire. At the moment the domestic banks hold about 1300 trillion yen in deposits. We all heard the news a few months ago when the Japan's national debt reached 1000 trillion yen. By the end of next year, the amount of JGB's issued will be over 1350 trillion yen, and by simple definition, Japan would become insolvent.

The goal of Japan's easing and bond-buying programs was to increase inflation. This was done purportedly to increase Japan's competitiveness in exports, but Japan was not competitive even when exchange rates were 140 yen to the dollar. The main goal of increasing inflation was to try to lighten the burden of the national debt, and maintain heavy public sector spending. With an inflation rate of 2% to 3% per year, much of the debt would be inflated away over time, as debt numbers are not tied to the rate of inflation.

But if what the article says is true, there will be no inflation this fiscal year, and there may in fact be further deflation. This indicates that Abenomics has probably failed.

-1 ( +1 / -2 )

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