politics

Tokyo stocks lower, dollar trading at Y77.90 as U.S. debt default looms

58 Comments

Tokyo shares lost 0.56% Tuesday morning, paring earlier gains as a lack of progress on crucial U.S. debt negotiations sent the safe-haven yen to a fresh four-month high against the dollar. The benchmark Nikkei index fell 56.71 points to 10,041.01 by the break.

The yen's strength against the U.S. dollar amid the U.S. political impasse fueled selling pressure further on Japanese shares, brokers said. A strong yen erodes exporters' overseas earnings. The dollar bought 77.90 yen in Tokyo, compared with 77.94 yen in New York, at one point falling to a fresh four-month low of 77.82.

Investors remained cautious over the stalled U.S. debt ceiling talks, said Kazuhiro Takahashi, general manager of investment strategy and research at Daiwa Securities.

On Tuesday, the dollar touched a four-month low against the yen in Tokyo after an address to the nation by President Barack Obama failed to indicate any progress on a debt agreement.

Despite the fast-approaching Aug 2 deadline, the White House, Democrats and Republicans have failed to reach a deficit-cutting budget deal. While the two sides agree a default must be avoided, they disagree on how to reduce the deficit, with Democrats wanting to cut some spending and raise taxes but the Republicans vowing to oppose any tax rises.

The U.S. government must raise its $14.3 trillion debt ceiling by Aug 2 so that it can pay its debts. A default by the world's richest country would cause a seismic event on global markets, analysts say, which would likely lead to another financial crisis and worldwide recession.

Obama has described such a scenario as economic "Armageddon."

The president late Monday went on prime time television to warn that the Republicans' unyielding approach to the U.S. debt crisis was a "dangerous game" and urged Americans to press for compromise.

With a potential U.S. default looming, Obama appealed to Americans to "make your voice heard".

However, Hideki Hayashi, global economist at Mizuho Securities, said: "The speech falls short of market expectations that the president might show progress on the ongoing standoff."

If the U.S. defaults on its debt, the value of U.S. Treasury bonds will plummet. Japan is the second largest holder of U.S. Treasury bonds.

© 2011 Agence France-Presse

©2019 GPlusMedia Inc.

58 Comments
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Hardly a surge, it's been trending that way for a couple of weeks now

-1 ( +1 / -2 )

U.S. actually has less influence on the strong yen. The main cause is China buying record amount of Japanese Bonds making Yen even stronger. However, Japanese cannot buy Chinese bonds. This is a one way street rule set by China. The Japanese goverment has to restrict Chinese purchase to a manageable level.

-1 ( +2 / -3 )

Learn how to make a fortune. Before BOJ/Noda intervenes let me/ people here take advantage of strong Yen and import as much as possible (radiation free items/food etc for personal use).

-3 ( +0 / -3 )

Hardly a surge, it's been trending that way for a couple of weeks now

true, its all a media hype - economic "Armageddon?!"

-2 ( +1 / -3 )

The main cause is China buying record amount of Japanese Bonds making Yen even stronger.

Exactly! Sooner or later, China will tell you what to do.

-3 ( +1 / -4 )

Time to buy some more land in America.

-4 ( +0 / -4 )

Perhaps they could start with trimming their Military expenditure to help repay debts. They have requested an overall military budget for 2012 of up to 1.45 Trillion Dollars. Seems to me that might be a great place to cut back spending and address financial obligations, but then, I'm not a Republican.

0 ( +3 / -3 )

I really hope that they will come to decision otherwise it will become a really big disaster.

-2 ( +1 / -3 )

If I had a dollar I would never exchange it for a mere 78 yen.

-3 ( +0 / -3 )

If I had a dollar, I would dollar in the morning.

-5 ( +1 / -6 )

This is great for all the people who have spare yen to buy dollars, but it sucks for everyone else.

-5 ( +0 / -5 )

The bond and stock markets in the US are NOT pricing in a default, so why is the yen strong? This article seems to imply the debt issue is the cause. Don't believe it. I've said it before that commodity and currency markets are dominated by traders who push prices to extremes for their own purposes. Watch the yen when the debt issue is resolved. It'll probably decline, but in no way will come back a significant amount. Then the "experts" will come up with another explanation for the yen's strength.

-3 ( +0 / -3 )

@Serrano: Yep, That's right. Lock in cheap vacations for the next couple of years.

0 ( +0 / -0 )

Can we use our strong yen back in Hawaii??

0 ( +0 / -0 )

With the Japanese government financial situation in tatters you would think the yen would be in the toilet, say around 240 yen to the dollar...

0 ( +0 / -0 )

Noda-shi, pls take action now!!!

0 ( +0 / -0 )

paulina, commodity and currency markets have been very active in the past two weeks. They want to park their investments at safer places.

0 ( +0 / -0 )

Was pondering where the strong yen is helping here in Japan? Went to buy some imported foods and the prices are no different from when the yen rate was 100 to the dollar. Good times, bad times, someone is always making a yen!

0 ( +0 / -0 )

Godan, very good point! We are paying way more for gasoline etc..here in Japan if with think about the prices in USD!!! We are getting RIPPED OFF BIG TIME!!

0 ( +0 / -0 )

Right, Elbuda? Doesn't make sense to me other than someone is ripping off the consumers in Japan big time!

1 ( +1 / -0 )

If the US defauts, the dollar will be only worth 30-50YEN.

1 ( +1 / -0 )

@Elbuda: But don't think about the prices in USD. You live in Japan and earn Yen.

0 ( +0 / -0 )

GodanJUL. 27, 2011 - 09:36AM JST Was pondering where the strong yen is helping here in Japan? Went to buy some imported foods and the prices are no different from when the yen rate was 100 to the dollar. Good times, bad times, someone is always making a yen!

Very true Godan, I was in Kaldi the other day buying some imported stuff and I realized the price of some of the items was actually higher than before. Times really SUCK for me cause all my earnings are in USD. Cringe!

0 ( +0 / -0 )

Is the USA the new Greece?

0 ( +0 / -0 )

If the US defaults, which I doubt very seriously, we will be all heading to the man-made global depression.

0 ( +0 / -0 )

Is the USA the new Greece?

Nah. No culture, no history... :)

2 ( +4 / -2 )

wow, the usa republicans are going to destroy two economies then. The USA and Japan. Amazing. And for what, basically nothing. In the end this is all a domestic terrorist act against the USA people and its government.

-3 ( +0 / -3 )

@southsakai: If you came here on a contract that pays you USD and didn't incorporate a cost of living adjustment into that then you only have yourself to blame.

0 ( +0 / -0 )

Is the USA the new Greece?

Not yet. If nobody buy US government bond or treasury, then we may become new Greece.

0 ( +0 / -0 )

I just hope other countries wake up and realize the their own economy shouldn't be affected by another nations.

-1 ( +0 / -1 )

wow, the usa republicans are going to destroy two economies then.

zurcronium, thank you for noticing it. That's why the US debt crisis is so critical for both countries.

0 ( +0 / -0 )

I wish Japan utilizes it's US dollar reserve to "influence" the present crisis, as in hold a behind doors session with the GOP and corporate party supporter and give them a deadline Wednesday this week to resolve this situation or Japan will release half of their reserve.

0 ( +0 / -0 )

Samurai, it may be a good idea as the US treasury is hard to dump.

0 ( +0 / -0 )

It will continue like this for a while. Yen will get stronger still.

And US will not default. Do not believe the hype.

1 ( +1 / -0 )

A US default is inevitable at some stage. Just look at the amount of debt it has and yet it continues to spend like a teenage girl with a no-limit credit card. Also, raising the debt limit will not help. It is impossible to borrow your way out of debt. Here is some advice to the US government: STOP SPENDING you cannot afford it. Get down from your high horse, slash the size of your defense budget, take the default, lick your wounds, learn some valuable lessons and then move on and never allow it to happen again.

Greed, gluttony and no discipline or patience has caused this massive debt mountain. The impatient and financial immature American way of life is to blame (i.e. buy now so I/we look cool and we'll worry about paying for it later).

-1 ( +1 / -2 )

I totally agree with Kronos. As I mentioned above, US will not default. Do not worry. Seriously.

0 ( +0 / -0 )

Yeah, that's great for Japan, but real bad for America !

-1 ( +0 / -1 )

"A US default is inevitable at some stage."

Complete nonsense.

0 ( +0 / -0 )

global:

As I mentioned above, US will not default. Do not worry. Seriously.

.

"A US default is inevitable at some stage."

Paulinusa:"Complete nonsense."

But both PaulinUsa and globalwatcher insist Obama's demands on raising the debt ceiling be met at once or - the US will default !

-2 ( +0 / -2 )

"But both PaulinUsa and globalwatcher insist Obama's demands on raising the debt ceiling be met at once or - the US will default !"

Really? We said that?

1 ( +1 / -0 )

But both PaulinUsa and globalwatcher insist Obama's demands on raising the debt ceiling be met at once or - the US will default !

Where did we say that? We do not appreciate anyone who makes up something we never said. You need to improve your comprehension skill.

1 ( +1 / -0 )

paulinuas - Really. So how is the broke US going to continue to borrow it's way out of debt? For every new dollar borrowed the amount the US has to pay in interest continues to grow. Hence, a US default is inevitable at some stage.

0 ( +1 / -1 )

tokyokawasaki : Older debt is retired and with less spending new debt is not needed. Eventually the size of the debt decreases.

0 ( +0 / -0 )

paulinusa

Older debt is retired and with less spending new debt is not needed. Eventually the size of the debt decreases.

That is when you have a balance of revenue and spending which the US sorely lacks. Reduced spending is not going to solve all the problems since it also reduces the size of economy making federal income smaller resulting to a vicious cycle.

0 ( +0 / -0 )

Samurai, You did not ask me to respond, but I agree we need to make the US pie bigger.

0 ( +0 / -0 )

paulinusa and others who want to learn how the US economy is controlled and doomed to fail if huge fundamental changes are not implemented, watch this award winning documentary: http://www.youtube.com/watch?v=7qIhDdST27g

0 ( +0 / -0 )

Samurai : Of course added revenue is a huge bonus. That's why the Bush tax cuts for the wealthy should be allowed to expire. And tax breaks for oil companies should be repealed. And farm subsidies meant for small family farms but expolited by big agribusiness should be discontinued. And on and on.

0 ( +0 / -0 )

Plus, the MEDICARE Prescription Plan "D" should be abolished.

Bush did not have guts to raise tax. Instead he introduced this plan "D" to avoid tax hike. Now look at the expenditure of MEDICARE, we do not know what to do with it. This could have been well avoided. What a mess!!!

0 ( +0 / -0 )

The U.S. will never default. China will not let it happen.

0 ( +0 / -0 )

i am buying like crazy on ebay!!! lol traveling soon too!!!

1 ( +1 / -0 )

If the US defauts, the dollar will be only worth 30-50SEN.

There fixed it for ya!

0 ( +0 / -0 )

Those of my generation remember the dollar trading at 360 yen for many years. This is not very good news for Japanese exporters.

0 ( +0 / -0 )

@southsakai: If you came here on a contract that pays you USD and didn't incorporate a cost of living adjustment into that then you only have yourself to blame.

If you live in South Sakai - wow you really are struggling....

0 ( +0 / -0 )

Who cares if the dollar tanks? There will just be another currency introduced to replace it

It has happened many times.........

1 ( +1 / -0 )

kurisupisu

It's the transition period that hurts.

1 ( +1 / -0 )

Not surprising. The recession is affecting an entire global financial market. The dollar value has already been in decline long before the Congress began to tackle with a debt ceiling. We may see some swings in exchange rate for another 5 days --and possibly for the next two months. It's not sure when the folks will put an end to this downward spiral.

0 ( +0 / -0 )

I smell a new currency. Seems like both sides are playing a role to lead us to a common end. AMERO? Please, for the sake of the truthers out there ... say it ain't so!

0 ( +0 / -0 )

The dollar will soon be worthless! It can't happen? Actually,history has seen many examples of currency failure. Nothing lasts forever,does it?

-1 ( +0 / -1 )

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