The Upside to Japan's 'Currency War'

Link: http://www.businessweek.com/articles/2013-01-24/the-surprising-upside-to-japans-currency-war#r=nav-r-story

This article explains Japan's current actions to affect their currency as well as their reasoning behind doing so.  In Japan's current currency situation, the yen is stronger than what they (the government and their domestic markets) want it to be, so the government is taking action by purchasing bonds from countries with weaker currencies in order to weaken the yen. The Japanese government is taking action in such a way so that they are able to spur domestic growth as a weaker yen will cause their exports to be cheaper while making their imports more expensive. Japan also hopes that its actions will put them at a 2% inflation rate (a healthy inflation rate) as opposed to the trend of deflation that they have been seeing. When looking at the big picture, with a world market looking for growth, Japan's weaker yen may be what is needed to help push growth.

However, smaller emerging markets criticize Japan's strategy. If one country racks up surpluses, another must take deficits and if Japan uses other currencies to weaken its own, they are causing the opposite to happen to those they are getting their bonds from. As Coy says, "Competitive devaluation is even blamed by some economists for the Great Depression." As a conclusion though, Coy says it best, even though it can be easy to point fingers at Japan, the big picture is of greater importance.