Gov't may intervene in forex market after dollar falls to upper Y77 level

Strong yen hurts exporters which hits employment, bonuses, then the economy and growth, tourism is only a very small blip when lined up against what can be brought in through exports.

Print yen devalue the damn thing and dont worry about the consequences, they will be less than no industry left here and no one with a job if you dont.

Tourism is not the issue here. It is the declining profitability of exporters with such a strong yen. Yen will remain strong while Europe and US struggle and until peeople realise the huge debt mountain Japan has accumulated.

Dog

The Yen is so high because Japan runs a current account surplus and has very little foreign debt.

Not anymore. The balance of trade of Japan has been negative nearly every month since January 2011. The problem is the speculators and scared investors. With the talk of a possible Euro breakup, investors are fleeing the Eurozone and trying to find safe places to put their money while the trouble is brewing. This influx of money is causing the Yen to increase, which it already tended to do as its inflation rate is relatively low and Japan had a trade surplus. The speculators, smelling a good deal, see the Yen's value increasing and decide to buy Yen to profit from this rise in its value. This increases the movement from the panicked investors and creates a vastly superior fluctuation in value than what should have happened otherwise.

The speed at which the Yen increased and the fact that it keeps increasing nearly 18 months after the trade surplus has vanished proves that it is not just a market readjustment. This is massive speculation. Japan is more vulnerable to it because its economy is smaller and its currency less used than the US dollar, and because the "normal" trend is already in that direction, the Yen was under-appreciated at 110 Yen per dollar. The US, with a large trade deficit, should normally see its currency fall, which temperates the speculative effect.

Look at Switzerland for another clearer example of that dynamic. Their Franc exploded in value during the Euro crisis, as it is a small country, often seen as a safe place to put money and next to the Eurozone. The Swiss had to get their central bank to announce that they would print unlimited amounts of currency to keep the Franc below a certain value to end this movement. Japan should do the same and announce a certain ceiling in the Yen's price, with the Central Bank printing unlimited amounts of money to reach it. The only thing they lack is the guts to actually do it.

If the Swiss, reputedly very conservative bankers, can find the courage to do it, why can't the Japanese?

Herve Nmn L'Eisa

The Gold Standard is an absurdity. So-called "fiat" currency will always be better because it's elastic, as it should be. Inflationary and deflationary forces are endogenous in the economy, in that even without a government or a central bank, they still exist, they come from how the system actually works, they are not strictly the result of external forces. This is why inflation rate reconstructions of the 19th century show massive inflation and deflation spikes, being the result of an elastic economy laden with an inflexible currency system based on gold.

Your trust in gold is also quite badly placed. Gold's value doesn't always increase. Gold has no intrinsic value. Someone buying gold in 1979 and selling it in 1999 would have lost 50% of their initial investment for instance. Gold was worth 800$ an ounce in 1979, but less than 300$ an ounce in 1999. Gold is a almost a ponzi scheme, as it is not really used for anything in the modern economy (just jewelry and some cables) its value depends only on how much people believe it will be worth. People who have invested in gold thus have an incentive to lie to other people about what good an investment gold is, and how much it is going to be worth, because the only people who buy gold are those who want to invest in it, expecting a good return on investment, and the only way they will is if they get bigger fools to buy gold at higher prices from them expecting it to gain in value. If gold prices start to fall and/or if the economy restarts and other investments start looking better, the value of gold will collapse like it did in the 80s and 90s.

Let me guess - they are going to spend another trillion on the currency markets, with another impact lasting two weeks tops.

Why not - that consumption tax money is as good as in the bank!

ExportExpert: An excellent analysis, my compliments!

Simply put, the yen is strong because there is a large demand for it.

Most people don't understand that the total amount of currency flowing thru the market on a daily bais is roughly equal to the yearly GDP of Japan (*/- a few billion here and there).

Thus the ability of individuals, even large individuals with "Market Power" be they large international banks or the Finance Minister of a G-8 country like japan to manipulate the currency over any appreciable length of time is extreemely limited.

Manipulating the market, either in the interest of speculation, or to defend a desired rate is like building a sand castle at low tide and then trying to keep the Pacific Ocean away with the bucket you made the castle with.

Dog hit it on the head. The other currencies are just so worthless. But the BOJ will likely do another injection to devalue the yen which will only last a day or three. Hooray for fiat currency.

Azumi has done this about 4 times in the recent past. And it didn't help then. And I didn't notice anything change much that it will have an impact now.

Time for some innovative leadership...try buying foreign alternative energy technology, reducing the debt..anything else..

Selfish note: paying off my American student loan faster than ever thanks to the unequal exchange rate. Hope it lasts however it takes me to pay off this huge amount.

Dog, Japan has always had an account surplus and was actually much bigger. Its all about currency speculation and annoucements that are used to move markets.

Japan is in the mist of destructive inflation, print yen and we will be on the road to recovery. When yen keeps getting more valuable people do not spend money. A little inflation will encourage people to spend money. If the yen was worth less exports become more and more possible, Now Japan has priced itself out of the market. So in these deflation times the government wants to raise taxes and take even more money out of the economy. How can Japan succeed with dolts leading the government?

My understanding is that rather than foreign speculators (including the PRC govt), the biggest influencer on the yen's rise is Japanese companies repatriating assets from abroad in preparation for a feared meltdown in the US and EU.

Very glad to not be being paid in USD at the moment.

Smash the speculator finance maggots.

Does anyone know why the yen is so high? It's a punishment by the Bank cartels...

Dog you make out you have a clue about the economy and the financial situation but you expect a pension in japan, you must be kidding yourself. Or you are retiring tomorrow which one is it?

Announcing that they will do something is their first line of defense. They are hoping the big speculators will be scared and stop putting upward pressure on the yen. Announcing can sometimes be as good as actually spending billions of yen. Its a good gauge the actual strength of the postion

The Yen is so high because Japan runs a current account surplus and has very little foreign debt.

The law of the free market FX deciding rates

I would say it is a lack of law in the free market that is responsible for the unbalanced currency rates, which, again, are occurring while the ratings agencies have downgraded Japan.

The fact that so-called "institutional investors" are looking for safe places to park their money and make marginal profits based on things like currency rates points to a dysfunctional regulatory regime with respect to the way currency rates are set and the way that institutions with large amounts of capital can affect the rates simply through buying currency of a country, which should be more of a meta phenomena, than investing in any tangible economic activity.

I don't think it's incorrect to refer to what those institutional investors are doing as speculation. And there ought to be some regulatory measures that can curb those types of practices.

@japangal sorry but you know as much about economics as you do about what sexy legs should look like, do us a favor dont comment about economic matters and change your avatar.

Sorry, I mean Dog's answer to Export Expert. Appologies for the confusion.

"Very glad to not be being paid in USD at the moment." I wouldn't mind, as long as they were Silver Eagles(or Gold), but not that junk paper.

I guess we can expect them to fool around with the currency again.

Yen is so high coz of scum bag speculators greed.

ExportExpertJul. 23, 2012 - 01:25PM JST

Yen is so high coz of scum bag speculators greed.

Wrong, as usual.

The Yen is so high because Japan runs a current account surplus and has very little foreign debt.

The law of the free market FX deciding rates, would make it much higher, if the Japanese government stopped manipulating their currency to begger their neighborurs.

Azumi is all bluff and it is very unlikely that Japan would get away scott free with another bout of currency intervention.

Japan's economic problems are domestic, a developed economy with an over capacity production of the same products and declining domestic demand. Other countries would die to have Japan's current account suplus.

The economic woes of japan - exports only make up 11% of the japanese economy - have very little to do with the Yen's strength.

A final note... the yen could be as cheap as hell, but I still wouldn't look at a Japanese computer. Samsung and LG products are far superior and I'd pay that extra for them.

kchoze, respectfully DISAGREE! I won't go into details to try to convince you, but there are numerous good books on the subject that your professors would not have had you read(as mine didn't either). Your argument about buying applies to anything; buy low , sell high.

The Japanese own their own debtso that is not a problem. However, I want to repatriate $200,000 and do not want to do it at this rate. Bring back the $1/1¥

avengerJul. 23, 2012 - 09:42PM JST

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They are hoping the big speculators will be scared and stop putting upward pressure on the yen. Announcing can sometimes be as good as actually spending billions of yen.

There are no speculators who are determining the rate of the yen. FX transfers in a day are nearly $3.5 trillion dollars. You'd need the currency reserve of one of the four biggest economies in the world to be able to influence the rate of the yen in a 24 hour period.

Japan runs a current account surplus and is virtually debt free on the international financial markets, therefore the Yen is a valued currency.

Is this point so hard to understand?

I know Azumi is as thick as two planks but I expect better of JT readers.

The BOJ has the right idea. They are not going to give those lard ass politicians a 'get out of jail free' card by just printing yen, without the politicians adding some fiscal and economic balance to Japanese government expenditure and the economy.

avengerJul. 23, 2012 - 10:39PM JST

Dog, Japan has always had an account surplus and was actually much bigger.

But other country's currencies weren't deemed worthless because of their debts and their deficit trade balances: that is the difference.

The only currencies worth anything at the moment, apart from the Germans who hide behing the Euro, are those

That are running a cuurent account suplus.

Don't owe money on the international market and have kept their debt domestic.

Japan doesn't have the option of borrowing money on the international market, although it eventually will have to, because as soon as it does, domestic interest rates would shoot up to 7% in a day from the present 0%,

The dollar would bounce right back up if people with dollars would simply refuse to exchange them for only 77 yen. I wouldn't.

It is about time someone shows some leadership. Does anyone expect an American tourist to come to Japan with a dollar and get less than 78 yen? In 2005 a tourist got 110 yen for a dollar. Yes, it is only pennies, but it adds up in the how much the tourist spends. It isn't difficult to decide: Europe or Japan for the tourist. Yet, there is continual "brain storming" on ways to increase tourism. Discount tickets or tax relief for tourists could be a start.

ExportExpertJul. 23, 2012 - 08:04PM JST

Dog you make out you have a clue about the economy and the financial situation but you expect a pension in japan, you must be kidding yourself. Or you are retiring tomorrow which one is it?

Sarcasm doesn't travel well, via the pen. I have more chance of winning the lottery than getting my pension, in full, in 2022.

I have made alternative plans!

"the uncertain outlook of the U.S. economy"

If Barack Obama is re-elected, the outlook of the U.S. economy will be certain to continue to be bad. If Romney's elected, we'll see. But that's not going to happen, so this is foreboding.

Simply put, the yen is strong because there is a large demand for it.

Most people don't understand that the total amount of currency flowing thru the market on a daily bais is roughly equal to the yearly GDP of Japan Thus the ability of individuals, even large individuals with "Market Power" be they large international banks or the Finance Minister of a G-8 country like japan to manipulate the currency over any appreciable length of time is extreemely limited.

Enough said.......

Next time this topic comes up, can we start higher than the ignorant rants of an Ex NHK presenter, Azumi, and look at real life resolution to the curremcy expectations of the Japanese and the realpolitik of global FX rates?

Hang on, this is japan.. no we can't because the Japanese narrative is the only one that matters.

My solution is allow 20,000,000 guest workers from third world countries to come and work in Japan. Not only would that resolve the issue of my expected Japanese pension but their repatriation of funds to outside Japan, would greatly weaken the Yen.

However after watching NHK news tonight, when the taboo subject of a resolution of a shrinking workforce was brought up and their only solution was to make women and old people work more, I don't hold out much hope that my solution will ever see the night of day, let alone the light of day.