September 15, 2010
Japan Intervenes to Weaken Yen
Japan's central bank intervened in currency markets for the first time in six years to weaken the value of the yen against the dollar (BBC), a day after the yen hit a fifteen-year high against the greenback and threatened the country's export-led growth. The weaker yen makes Japanese exports less expensive and increases profits when earnings are returned to Japan. Shares in exporters Honda, Canon, and Sony rose after the government intervention (Reuters).The yen had spiked after news that Japanese Prime Minister Naoto Kan--who traders thought would refrain from weakening the yen--survived a leadership challenge from rival Ichiro Ozawa.
Finance Minister Yoshihiko Noda said the yen's rapid appreciation threatened to destabilize Japan's already weak and deflationary economy. Other central banks in Korea, Singapore, and Taiwan may be more likely to increase their dollar purchases to protect their exporters after Japan's move (WSJ). It will also likely heighten tension around the issue of China's continued intervention to hold down the value of its currency, as the U.S. Congress holds a series of hearings this week to investigate blocking Chinese imports or taking the issue to the World Trade Organization (FT). Japan's currency move makes it harder to single out China as the only major economy that is manipulating its currency.
Analysis:
On CNN.com, Kevin Voigt says the difference between Japan's "intervention" in currency markets and China's "manipulation" of the yuan is mere semantics in economic terms and driven by politics.
On TIME.com, Michael Schuman says a weaker yen is a policy crutch that allows Japanese politicians to avoid tougher economic reforms. Since every country wants to export their way to recovery, including the United States, the world risks sinking "into an era of beggar-thy-neighbor policies that end up hurting everyone."
On WSJ.com, James Simms says Tokyo's intervention will "find its efforts spoiled if the U.S. Federal Reserve undertakes a second round of quantitative easing." Already-low U.S. interest rates have contributed to the yen's strength.
http://www.einnews.com/japan/
Japan Intervenes to Weaken Yen
Japan's central bank intervened in currency markets for the first time in six years to weaken the value of the yen against the dollar (BBC), a day after the yen hit a fifteen-year high against the greenback and threatened the country's export-led growth. The weaker yen makes Japanese exports less expensive and increases profits when earnings are returned to Japan. Shares in exporters Honda, Canon, and Sony rose after the government intervention (Reuters).The yen had spiked after news that Japanese Prime Minister Naoto Kan--who traders thought would refrain from weakening the yen--survived a leadership challenge from rival Ichiro Ozawa.
Finance Minister Yoshihiko Noda said the yen's rapid appreciation threatened to destabilize Japan's already weak and deflationary economy. Other central banks in Korea, Singapore, and Taiwan may be more likely to increase their dollar purchases to protect their exporters after Japan's move (WSJ). It will also likely heighten tension around the issue of China's continued intervention to hold down the value of its currency, as the U.S. Congress holds a series of hearings this week to investigate blocking Chinese imports or taking the issue to the World Trade Organization (FT). Japan's currency move makes it harder to single out China as the only major economy that is manipulating its currency.
Analysis:
On CNN.com, Kevin Voigt says the difference between Japan's "intervention" in currency markets and China's "manipulation" of the yuan is mere semantics in economic terms and driven by politics.
On TIME.com, Michael Schuman says a weaker yen is a policy crutch that allows Japanese politicians to avoid tougher economic reforms. Since every country wants to export their way to recovery, including the United States, the world risks sinking "into an era of beggar-thy-neighbor policies that end up hurting everyone."
On WSJ.com, James Simms says Tokyo's intervention will "find its efforts spoiled if the U.S. Federal Reserve undertakes a second round of quantitative easing." Already-low U.S. interest rates have contributed to the yen's strength.
http://www.einnews.com/japan/
