http://www.businessweek.com/articles/2013-01-24/the-surprising-upside-to-japans-currency-war
This article discusses Japan's continuing efforts to raise a reasonable level inflation in a country that is currently experiencing deflation. This, however, has the added effect of weakening the Yen - something Prime Minister Shinzo Abe is encouraging. He would like the Bank of Japan to go further and buy foreign bonds with Japanese Yen to weaken the currency.
This should ideally lead to a rise in Japan's exports and shrinking of their imports. However, since trade is a zero-sum game, when one country racks up high surpluses - the other country racks up deficits. This has led to people criticizing Japan for starting a 'currency war' that will spread to emerging economies. The actual effects of Japan's decisions are yet to be seen but they are definitely in Japan's national interest.
This article discusses Japan's continuing efforts to raise a reasonable level inflation in a country that is currently experiencing deflation. This, however, has the added effect of weakening the Yen - something Prime Minister Shinzo Abe is encouraging. He would like the Bank of Japan to go further and buy foreign bonds with Japanese Yen to weaken the currency.
This should ideally lead to a rise in Japan's exports and shrinking of their imports. However, since trade is a zero-sum game, when one country racks up high surpluses - the other country racks up deficits. This has led to people criticizing Japan for starting a 'currency war' that will spread to emerging economies. The actual effects of Japan's decisions are yet to be seen but they are definitely in Japan's national interest.
the Japanese economy is trying to become a consistent world powerhouse, and with the weakening of the yen they are trying to ensure that Japanese goods are still desired through a fair trade deficit
ReplyDeleteThis strategy seems like it will have many negative effects. Won't other Nations start buying Japanese bonds counteracting the effects, and rendering Japan's plan useless?
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