Japan's bid to address weak yen sidelined by G20 rift over Russia

What are other central bankers supposed to do about the Japanese yen? Reduce interest rates during record inflation so that Japan's inept government and BOJ can save their faces?

I’m waiting for the yen to bounce back against the Australian dollar. I still have a sign I can’t amount of money in a Japanese bank. I won’t be withdrawing it anytime soon though. It’s nearly even money.

Getting paid in dollars was a raw deal back in 2011, but it feels quite good now. Japan has been diluting its currency, financing itself with “asset purchases,” and even buying into ETFs in the stock market, all in an effort to devalue the yen and to hit its elusive 2% “price stability” (inflation) goal. Now that they are finally getting what they have been working for a decade to obtain, they now see it to be a problem?

They themselves are the ones to fix the economy of Japan. Other countries have no reason to adjust their economies for another, ESPECIALLY Japan. The lazy way of governing and management here is well known and no one is going to smile and bow when they come calling beyond their boarders.

Think a bit for a moment. Wages have not increased in Japan because there has been no inflation. My wife was complaining a little about how she our bank savings was earning.01% interest. However, deflation had increased the value of our savings by 6.8%. In a deflationary economy your wages needn’t increase when they currency you are paid in increases in value.

Few people are more critical than myself of how Japan runs its economy. But when you look at the disastrous results of recent American and European economic policy, Japan looks pretty dam good.

I dont get how a country can complain their economy is doing bad to other nations... sort it out Japan

Toyota et al. are making bigger profits on their overseas sales? Then why don't they share it.

They are surely sharing their profits with their shareholders. That’s why shareholders are called shareholders and anyone can buy some Toyota shares if they want to.

 that's not how neo-liberalism works.

Japan has never done neoliberalism anyway - hence all the JT articles about government price controls and subsidies, for example.

Edit: Significant amount of money.

I once used "BOH" instead of BOJ. And "theey" instead of they. Sorry about that.

So, raise the interest rate.

combined with surging crude oil and other commodity prices, as is the case now, a sharp fall in the yen becomes a headache for the resource-poor country as it pushes up import costs and could dampen consumer spending.

It would be worthwhile to greatly reduce reliance on comodity resources if Japan made more use of thermal, solar, wind and tidal energy production. The hard part is setting it up correctly but once done the need for coal and fuel could be greatly reduced. Worthwhile objective's are hard work and expensive initially, but once completed the effect can be long lasting and solve long time problems of relying on imports for what is a basic need. Power, to run everything electrical including EV's, buildings, and equipment. Even just getting close to self sufficiency on that alone would be of inestimable value to Japan.

130 will be a good number to stay at and maintain.

80 yen to almost 130

and prior to the Plaza accord that effective was forced down Japan throat, the yen was around 200~270yen / $, Japan was booming

then Yen then crashed to around 120/ $ within 2yrs 85~87 effectively stifling Japans economy ever since,

then came the bubble burst of 1989

Well yeah, what did they expect.

They themselves are the ones to fix the economy of Japan. Other countries have no reason to adjust their economies for another, ESPECIALLY Japan. The lazy way of governing and management here is well known and no one is going to smile and bow when they come calling beyond their boarders.

Like the article said, other countries have seen growth in wages and more over the last decades, something that keeps stuff moving. Japan isn't just not doing it, its outright refusing to do it or create an environment where companies can or must do so.

This is the result. A country with 0 influence on the global stage when it comes to economics. It's like when the BoJ head said "we will take necessary steps for prevent further declines in the yen" the other week, and the yen INSTANTLY tanked another 30 cents. The world isn't stupid, they know big wigs here in Japan will do absolutely nothing to change the status quo. Their good enough rhetoric from the 80s is still in play, and the rest of the world isn't dumb enough to fall for it.

It's going to keep dropping and we are going to keep getting old men telling us "we are deeply concerned and monitoring the situation closely," bruh, you been looking at it since 1988, take the hint.

Sorry, folks, but Kuroda-san needs his 2% inflation target. He retires soon, and doesn't want failure of his life's work to be his legacy.

Toyota et al. are making bigger profits on their overseas sales? Then why don't they share it.

Because that's not how neo-liberalism works.

sangetsu you were doing great, until that last sentence!!

The Japanese yen versus the dollar has gone from 80 yen to almost 130 - the currency has sadly decreased in value as a result of the recent rubbish policies, not held steady.

Unfortunately the politicians think fiddling with the currency is all there is to running the economy. But there is so much more than that and sadly they did virtually none of it.

Of course 22 years of bad LDP leadership, insulting our four biggest trading partners in Asia and spending all our pension money on US bases and overpriced weapons is not to blame. It must be NK. Or China, and now the magic ticket…Russia to blame. Come on G20, beg, beg, beg.

Easy, let’s demand all incoming payments in gold, dollars, yuan or rubles, but pay them only with newly printed yen. If they do, fine, and if not, then at least this topic will be not sidelined anymore but become top priority.

There are obviously more pressing priorities in the world to deal with right now, than the value of the Yen.

I’m waiting for the yen to bounce back against the Australian dollar.

Waiting, or hoping?

The hapless yen might get a reprieve at some point, but one would be lucky to recognize it and sell it at the right moment.

If you sell your yen now, you might enjoy the interest on your Australia dollars that you are foregoing while the yen plunges.

High inflation will probably be with us for an extended period. High interest rates, if high enough to bring inflation down, still take a year or two to do the trick in the best scenario.

If it feels hard to sell yen now while they have dropped in value, imagine how it will feel after another 10, 20 percent or more drop in value.

A 20% fall in the yen means everything imported into Japan is 20% more expensive. That covers just about everything people buy on a daily basis, except some locally produced food. Even this will be more expensive as farmers need imported inputs such as energy and fertilizer.

Yes, Reckless, we are getting poorer.

Oh, what's that I hear?

Toyota et al. are making bigger profits on their overseas sales? Then why don't they share it.

One of three main take-aways of this article is that BOJ Governor Haruhiko Kuroda tried hard but just couldn't get the G-20 finance people to talk about the yen's problems, because they were too focused on Russia's invasion of Ukraine.

Two, that BOH isn't likely to back away any time soon from its monetary policy. And no one expects it to, but everyone in the time zone knows by now that it is being watched carefully.

Third, is that there's likely pain ahead, but hey! What can you do?

Let's talk.

Small wonder the G-20 didn't want to wade into all of this and Russian headaches, too. Everyone in the room clearly knew what the BOJ was doing and why. And had small stomach for the hard medicine that would be necessary to reverse the effects of BOJ's misjudgments (writing already clearly on the wall) over the past several fiscal quarters. Everyone in the room knew that a weak yen was a purposeful strategic decision: In normal times it is a huge blessing for an export-led economy. And an unqualified boon.

But these are not normal times. In the words of one economist: “The U.S. currently has a consensus that inflation is bad as food and fuel prices are soaring in America. If they decide to intervene to weaken the dollar against the yen, the problem only worsens. The BOJ is expected to not tighten its monetary policy for some time, so essentially the weak yen is Japan’s fault.”

Blunt.

The G-20 saw BOJ's behavior it for what it was / is: Japan’s desire to keep interest rates pegged by buying bonds and issuing currency. BOJ is unrelenting in its unlimited buying of 10-year Japanese government bonds to stem any movement higher in long-term borrowing costs above 25 basis points.

A month ago, in a speech to the Japanese parliament, Kuroda said: “There is no change in the basic structure that a weaker yen has positive effects on the Japanese economy by pushing up the overall economy and prices.” A January BOJ report backed this up by estimating that a 10% depreciation in the yen pushes up Japan’s GDP by a full percentage point. Yea!

Besides, BOJ argues, with consumer demand being weak - despite years of artifically low consumer price increases (until now) - higher interest rates very well may choke off any economic growth, and set wage stagnation into concrete for some time to come.

They have a point.

The downside to all of this was / is painfully clear: Global commodity shortages, combined with high global commodity prices, combined with higher import prices for all goods because of the weak yen, forces BOJ to buy more bonds (their latest authorization was last Thursday!) and print more money, and spend more as stimulus to offset rising consumer prices, attempting to artifically hold down internal inflation at a time that global inflation was / is rising. A cycle, repeating itself over and over, since the BOJ realizes the strong medicine that is needed to break the cycle may also break the Japanese economy.

Unless it gets help from its friends. Absent that, it really needs political cover. That is why Kuroda came home and said the G-20 just wouldn't listen.

One more statement in the article deserves comment:

Kuroda . . . said the inflation in Japan stems only from surging raw material prices and "lacks sustainability."

With global food and global energy prices reaching the beyond the stars - with no let up in sight - along with the Japanese policy of buying huge government debt, combined with exorbitant economic stimulus and economic offset packages currently being approved and executed by the government, he probably should have been more candid to Japanese consumers.

In normal times, you can wait out headwinds against your policies, and

chances are that theey will mitigate fairly quickly. But, again, these

are not normal times.

Key to all of this: If, during their careful watch of the yen, Japan decides to turn away from its ultraloose monetary policy (possibly what the G-20 told Kuroda what should have happened fiscal quarters ago), the resulting higher interest rates, combined with higher labor costs and higher borrowing costs, may prove unfortunately fatal to the country's weak Covid economic recovery.

The Japanese yen, what a joke of a "currency". Nobody holds the disgusting yen anymore. Everybody holds Swiss Francs and Dollars. Impossible for Japan to attract foreign talent now, unless companies pay them in Dollars.

All this because the "genius" Kuroda and Abe of yesteryear wanted to return to an export-based economy when "Beautiful Japan" was booming.... but oopsy... forgot that everything at home is rising as well, except wages, and surprise surprise no one is heeding the calls to sacrifice themselves and spend more for big business. Who could've seen any of this coming aside from said geniuses?

Is it any wonder Korea will pass Japan economically by 2028?

Because they're not interested in fixing it. Big Japanese companies imaginarily benefit so they'll let it go to hell, may as well be pegged to the Russian Rouble at this point.

The whole BS about Japanese companies benefiting when repatriating profits only holds water when the dip is temporary. Long term sustained weakness is going to hit them just as hard, they aren't exporting 100% domestically sourced en products.

So, raise the interest rate.

So 0% growth goes to -5%. Great idea. Why doesn't the ruling regime, or the occupation force install you as finance minister?

Invest in rubles now, sell them when Europe crashes and buy yuan. You will be rich.

What rifts is the article referring to?