Currency War: Japan

Monetary authorities are preparing to let Asian's currencies falling as Japanese yen makes the economies in Asia became uncompetitive.  The post world war ii Japanese economy was built up from exports, which means japanese will always has a weak currency. However, a weak currency is the main requirement for strong exports. There are some parallel with the 1997 when the japanese yen became extremely weak. There were also highly uncompetitive exchange rates and current account deficits culminated in the Asian currency crisis. 

According to the Bank of International Settlements, the japanese yen is down about 20% against the U.S dollar just since the last summer. With this, would the japanese yen collapse? But actually this is not an accident. Japanese prime minister is trying to kickstart the country's economy by printing as many yen as he can. Chinese and South Korea exports to America and have risen about 20% in the past two years, while Japan's are down by 2%. The weak yen allows Japanese firms to cut theprice of exports in foreign currency terms without reducing their earnings in yen. They keep international prices stable and pocketing extra yen.

A weaker yen believed to give a positive impact on Japanese jobs and industry, it makes foreign imports more expensive in Japan and making Japanese exports cheaper abroad.  But any significant devaluation by China will put more pressure on the yen. Japan might have a bond-market crisis that would have to be met with even more policy easing. It is obvious that devaluations must be orderly to minimize the risk. It is more likely that Japanese Prime Minister Shinzo Abe's government is just looking for a way to raise sustained growth in a depopulating and dept-heavy nation. Yen would continue rising, it can be seen from the government's program and  foreign exchange traders have more influence on the value of yen, dollar or euro. But if foreign traders can make profit from a rising yen, they will keep bidding it.

Author : Carnesia Deswara Chandra 1801400480