I see your point here, Japanese economy is encapsulated in a liquidity trap, it is the problem of low consumer confidence and low consumption, favorable exchange rate route is the export led growth policy route which some in Japan think can take Japan out of this demand side problems.. They need some real demand in the domestic economy- I remember that Toyota was breaking even at Yen 80 to a $, they have this productivity gains which can withstand a 20% strength in Yen, however Yen weakeness does not help grow the domestic demand, everyone is prodding Japan to intiate measures so as to increase the Japanese domestic consumer demand, even at 80 Yen to a $ Japan never really ran a trade deficit, in my opinion the problems of weaker Yen are far more than problems of slightly stronger Yen.. If domestic demand remains sluggish the global finance community cannot allow Japan to continue to negotiate its structural prolems of low consumption on back of literary triggering a second round of global devaluations, Yen weakness exerts a lot of pressure on ASEAN exports like Taiwan Korea Singapore even little bit of China is affected, now if the exports of these countries fall as result of market share being taken by Japanese their would be a real chance that China would go for that devaluation which would mean another round of crippling adjusments in the entire region.. The recent weakness of Yen was putting a lot of pressure on China and ASEAN economies even the HK peg was under severe threat one from the speculators as they could see that China is on brink of Yuan devaluation as her exports were suffering and second they knew that Chinese devaluation would have a averse affect on HK and HK Monetary Authorities will not be able to defend the peg, the peg could be taken out..
Now it is in this background I see that Yen strengthening against $ is a co-ordinated effort, it is going to help, these cyclical movements of currencies are part and parcel of balanced global demand, it was not in a very distant past that we had seen $ at 70 to Yen, it should have not been their at first place but due to factor of leverage the movements in markets are far too skewed, Japan never came out of that recession even at that high level against the $, the issue is not corporate profits in Japan the companies are productive enough the issue is that even at 0.25% Japanese are not able to lend, there are no credible borrowers, the credit squeeze is very unfrtunate smaller companies want credits but the banks are unable to lend as collateral demanded are very stringent, they need to prod dmeand they need to deregulate, they need to have a broad huge sale where they should put massive discounts or create inflation so people may spend now or buy now in absence of inflation sometime people just don't spend, last but not least permanenet huge tax cuts will only lead to higher savings it has to be a social change, the aging population should be encouraged to move in better living conditions, the young ones 'libido' need to recharged more children better bigger families, I am an optimist because I still see the demand in Europe very strong, domestic growth picking up and fortunately people are multiplying, deflation hit societies are not like US or Europe or free spending ASEANs.. If I take your argument on board it would be strange that Nikei has 700 plus rally after this fall and $ weakness, we were sitting at a very critical support we should have broken it to lower levels..US $ weakness is helping a lot of nations.
I assure you that I try to fwiw express mu opinion very clearly, like any human being I have my bents but to hide certain facts will hit me very badly, on this thread I theorise my trades, anything I write I will execute as such I am very careful to look at all sides before taking a plunge, however since I am one small investor my views cannot be as cogent as a professor of economics, I try to make positive statements normative statements are out of my domain. Thanks for your very good response.. I tried to answer your questions but if you still have questions I will try to define my position further.. |
