Japan Learning the Hard Way, Destroying your Currency is Not an Economic Strategy

Japan will learn the hard way that destroying your currency is not an
viable economic strategy.

Shanghai Daily

JAPAN posted a record 1.63 trillion yen (US$17.4 billion) trade deficit in
January as rising exports trailed surging imports of crude oil and gas due
to rising prices and the weakening yen.

The provisional data released yesterday show exports for the world’s third
-biggest economy rose 6.4 percent to 4.8 trillion yen in January from a
year earlier, the first year-on-year gain in eight months. Imports jumped
7.3 percent to 6.43 trillion yen.

A weakening in Japan’s currency over the past few months has helped boost
exports by making its products more price competitive overseas. But it has
also inflated the value of resource-scarce Japan’s imports of crude oil and
other commodities, which offset a recovery in demand for Japanese-made
vehicles and machinery.

The trend is hindering Japan’s long-time strategy of relying heavily on
exports to drive growth and adds to pressure for stronger domestic demand
at a time when the workforce is aging and shrinking and corporate investment
is feeble.

Japanese Prime Minister Shinzo Abe is expected to seek help from the US in
a visit later this week to Washington, where he plans to appeal to US
President Barack Obama for wider access to cheaper exports of US shale gas,
Kyodo News Service and other local reports said.

Abe’s office would not confirm those reports. But it did say that “the
government of Japan attaches utmost importance to the necessity of
cooperation in the areas of resources and energy, particularly considering
our current stringent energy situation,” after the March 2011 disasters.

The Fukushima Dai-Ichi nuclear accident, triggered by a massive earthquake
and tsunami, led to the closures of most of Japan’s nuclear power plants,
necessitating a sharp increase in imports of oil and gas. Abe took office
in December vowing to boost the economy by restoring Japan’s export
competitiveness, while creating demand at home with higher public works.
spending. Trade with the US and major Asian trading partners rose early
this year as the global recovery strengthened and the economic impact of
friction with China over a territorial dispute appeared to recede. But trade
with European countries was weak, with a 6 percent fall in exports from a
year earlier. Imports from Western Europe climbed 6.3 percent.
Exports to the US rose 11 percent from the year before to 839.8 billion yen
while imports rose 5.8 percent to 521.1 billion yen. That boosted Japan’s
surplus with the US by 20 percent from a year earlier to 318.7 billion yen.
Exports to China rose 3 percent but imports surged, leaving a gap of 654.6
billion yen, up 11 percent from the year before

7 comments

  1. They are destroying their yen by sopping up an horrendous overhang of sloshing US dollars which – if they were sent back to America would set off a hyperinflation like the world has never seen!

    The Japanese will obey the banksters and do as they’re told or the US/NATO syndicate will pull a Saddam Hussein or Gaddafi upon them!

    Watch: http://chasvoice.blogspot.com/2012/10/how-fed-treasury-use-exchange.html

  2. TC says:

    Your comment at the top is spot on. Yet as Japan’s trouble extends beyond demographics and intersects a hegemonic global finance insisting debt burdens are sacrosanct making its necessary reorganization a sacrilegious treason, thus, then, is Japan been backed into this corner. They’re not alone either.

    So, I’m wondering who in Asia is squawking about the yen’s devaluation? I’m thinking China is not happy. Is this correct?

    • D.Collins says:

      Corporate China is a little lower on the value chain against Japan so they are not
      the major complaining country. The biggest ones would be Korea and Taiwan.
      Its quite interesting for the U.S. to call China a currency manipulator, which of course
      they are, but at the same time not mention open currency manipulation by Japan and
      Korea. Our so called allies who have been de-industrializing America since the 1960’s.

  3. Rob says:

    Dan,

    It is a race to the bottom. I hypothesize a weak Yen and a weak Euro are both propping up a weaker greenback. I believe this race to the bottom is intentional given the monetary and fiscal issues plaguing the United States.

    Eventually, the U.S. suffers currency crisis because of a lack of confidence; as a result, currency devaluation like Venezuela and price controls like Argentina.

    In your personal opinion, is it possible this collapse can be averted until 2020? How long can China print yuan to soak up dollars?

    Thanks,

    Rob

    • D.Collins says:

      Hi Rob-
      Agreed on Greenback being propped up as the Yen, Euro, and Pound struggle.
      I expect the Yen will be next, Pound is getting slammed this year as well.
      I expect countries will change from trying to debase their currency and
      instead be forced to try and prop up the value of their
      currency but it will fail. Inflation in the U.S. will be the trigger where
      people demand interest rates go up, then we go into currency collapse and
      government default. Exact timing is impossible to tell, but 2020 would be
      a long way out. We are probably looking at 2016 or so.

      China is undergoing environmental collapse because they have moved the
      entire world’s production capacity to China. At their base, however, they
      have an efficient (low) tax structure, and free market capitalism without
      any welfare state at all. The population is also educated now, better than
      the U.S. With their focus on the real economy , they will survive better and
      probably come out on top as they can actually produce real goods and services.
      Believe it or not, the U.S. is in a Utopia now, money is printed for free and
      the country doesn’t have to pay for its imports. When that ends, it will get ugly.

  4. Umpa says:

    What Japan needs to do is devalue yen by pair trading by also shorting COMEX silver. This way, the flight to equities will produce a fed induced rally, and silver will be used not as a precious metal but only for its industrial demand.

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