You mean selling them, not repatriating them. If I have a stash of yen and I want to get rid of them, I can't "repatriate" them. Similarly, if the Japanese Ministry of Finance decides to get rid of dollars, all they can do is sell them, presumably in exchange for something else, i.e., yen.
So if they dump dollars, what does that do to the price of yen vis-a-vis dollars? My guess is make dollars cheaper, which they don't want. Remember, they want the US to buy Japanese goods, so they want a strong dollar. They also want China and everyone else in Asia and the rest of the world to buy Japanese goods, so they want a weak yen. So that's one reason they won't dump dollars.
Another reason is that it's a violation of a number of international accords - monetary stability is the goal.
Frankly I think we in the US are keeping the dollar up vis-a-vis the yen deliberately, as an aid to Japanese restructuring, at the request of the Japanese government, perhaps to our short term detriment, but overall we would not benefit from a collapse of the Japanese economy in the long run. Some comments by Lawrence H. Meyer recently:
>>The relationship between the Federal Reserve and the executive branch was exceptional during the
Clinton Administration. Early indications point to a continued excellent relationship with the new
Administration. In contrast, the recent relationship between the Bank of Japan and the rest of the
Japanese government seems not to have been so good. This undoubtedly reflects in part the fact that
the Bank of Japan and the Ministry of Finance are still working out their respective roles following the
Bank gaining greater independence. An interesting question, however, is whether the tensions have
affected policy outcomes and macroeconomic performance. It sometimes appears that the result has
been a stalemate or the outcome of a noncooperative game.
For example, has the Bank of Japan been reluctant to engage in bolder monetization strategy in part
because of differences in policy priorities and tensions with the Ministry of Finance? The Bank of
Japan seems to believe that operations in longer-term government bonds reduce the incentive of the
government to move toward fiscal consolidation. Therefore, monetary policy in Japan might be
affected not only by views about how such policies would affect macroeconomic performance, for
given fiscal policies, but also by views about how fiscal policy might adjust to monetary policy. Another
way to pursue more stimulative policy, even once the nominal policy rate is driven to zero, might be to
carry out open market operations in foreign bonds – in effect, unsterilized foreign exchange
intervention. But foreign exchange intervention is at the discretion of the Ministry of Finance, not the
Bank of Japan, so this direction might at least give the appearance of ceding control of the timing and
magnitude of monetary policy actions to the Ministry of Finance. Such an appearance would be a
problem even under the best of relationships, but such a direction may be still less likely when there
are tensions between the two parties and when the independence of the central bank is so recent.
Finally, the Bank of Japan may believe that there are limits to what monetary policy alone can
accomplish and, given the uncertainty about the effects of monetization, may resist moving in this
direction until the government moves decisively to deal with banking problems and the overhang of
corporate debt and more boldly to open markets to domestic and international competition.<<
bis.org |
