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World's Second Largest Economy May Halt Currency Rise

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http://www.telegraph.co.uk/money/main.jhtm.../ccjapan104.xml

Japan may cap yen to stave off slump
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 7:31am GMT 04/03/2008
Pressure is building in Japan for official intervention to cap the surging yen before it triggers a sharp industrial slowdown and tips the country back into slump...../
Often forgotten, Japan is still the biggest creditor nation by far, with net overseas assets of $3,000 billion. Major shifts in strategy by Japanese investors can have huge effects on global markets, all too often catching the rest of the world by surprise.

It is all very well for the US to devalue its currency to remain competitive export-wise but the collateral damage is hurting other economies who are finding their exports are priced out of the US and other marklets where the $ is pegged to the local currency.

Japan had a wonderful HPC with years of deflation that followed. The US and other housing bubble economies are facing the same scenario. With trillions that never were being removed form the books something big must happen. House prices must go "Japanese" as the effects of evaporating credit are felt worldwide. The adjustment will be painful and necessary. Ben's cuts are not designed to save the housing market but to prepare for deflation. Something Merv and Jean-Claude must also do.

Edited by Realistbear

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The carry trading must be really hurting the banks. The Yen has appreciated 5% against the GBP in the last couple of months.

This is a big event unfolding behind the scenes. All the cheap money borrowed from the Japs, doesn't look cheap anymore.

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Thing is, exactly "how" is Japan going to stop its currency from rising? It's interest rate is 0.5%, it's got almost nowhere to go! Yeah they can print money - and there is evidence that they've been doing that - but so far they've managed to push money supply growth to a whopping 2.1 % (3.6% in "broadest money supply", whatever that means), a little over a percent more than last year. Japan has got a national deficit the size of a dying sun, so they simply don't have the money to fritter away on buying dollars to affect currency rates - something that would be very hard for the current government to endorse anyway given the virtually hung diet (parliament).

I can remember Fukuda giving a warning about this last December, but really he has no power to do anything about it.

Edited by agb41

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Japan has got a national deficit the size of a dying sun, so they simply doesn't have any money to fritter away on buying dollars - something that would be very hard for the current government to endorse anyway given the virtually hung diet (parliament).

The last time Japan were put into this kind of a shakedown things got pretty damn ugly.

Let's hope they don't decide to engage in a little oil exploration, '40s style.

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Thing is, exactly "how" is Japan going to stop its currency from rising? It's interest rate is 0.5%, it's got almost nowhere to go! Yeah they can print money - and there is evidence that they've been doing that - but so far they've managed to push money supply growth to a whopping 2.1 % (3.6% in "broadest money supply", whatever that means), a little over a percent more than last year. Japan has got a national deficit the size of a dying sun, so they simply doesn't have any money to fritter away on buying dollars - something that would be very hard for the current government to endorse anyway given the virtually hung diet (parliament).

I can remember Fukuda giving a warning about this last December, but really he has no power to do anything about it.

Yes, that's about right.

The current level of the Yen is not especially high anyway ,it's often been at the 100-105 level to the dollar and around 160-180 to the Pound for much of the 90's. A rise of 10 to 20% from this point will not be a disaster for Japanese exporters and of course it would moderate to cost of imported fuel and food...something that would help ordinary Japanese people. It's difficult to see a situation where the Chinese will strengthen the Yuan by 5% a year but allow their major regional competitor to keep it's currency weak.

Hopefully their'll be a political shake up this summer. As I've mentioned before the Japanese are capable of following the same course for a painfully long period of time....then suddenly turn and head off in a completely different, sometimes opposite direction.

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The last time Japan were put into this kind of a shakedown things got pretty damn ugly.

Let's hope they don't decide to engage in a little oil exploration, '40s style.

The Japanese tend to copy nations that they consider to be successful. They copied the Nazis in the 30's and 40's (in some cases taking things a bit further)and then copied the US by creating a consumer society in the second half of the 20th century.

Other Asian countries are now much stronger than at any time in the past and have nothing to fear from Japan's self-defence force. In fact the Japanese would do well to keep a low profile as there's nothing they'd (the Chinese especially)like better than to take revenge for the atrocities commited against them.

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Thing is, exactly "how" is Japan going to stop its currency from rising? It's interest rate is 0.5%, it's got almost nowhere to go! Yeah they can print money - and there is evidence that they've been doing that - but so far they've managed to push money supply growth to a whopping 2.1 % (3.6% in "broadest money supply", whatever that means), a little over a percent more than last year. Japan has got a national deficit the size of a dying sun, so they simply don't have the money to fritter away on buying dollars to affect currency rates - something that would be very hard for the current government to endorse anyway given the virtually hung diet (parliament).

I can remember Fukuda giving a warning about this last December, but really he has no power to do anything about it.

by magic silly!

they borrow from the BOJ, say $250billion worth of yen.

they trade their yen for dollars (or dollar debt, same thing)

OMGWTF magic

its not hard to do!

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It is all very well for the US to devalue its currency to remain competitive export-wise but the collateral damage is hurting other economies who are finding their exports are priced out of the US and other marklets where the $ is pegged to the local currency.

A similar case could be made against China's export-oriented exchange-rate policy (which is arguably what has driven the US into its current position).

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  • 295 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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