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View Full Version : Japan requests help in race to the bottom


SmPot
03-18-2011, 09:48 AM
http://www.bbc.co.uk/news/business-12787285

Can somebody explain WHY a country would want to weaken their currency under a SHTF scenario? I'm corn-fused.

Silken
03-18-2011, 11:10 AM
http://hosted.ap.org/dynamic/stories/U/US_FED_INTERVENTION?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2011-03-18-09-01-18

is all foreign too me..LOL

when $ is backed by nothing of real value you can do just about anything you want.. .. example.. I will give you 1,000 dollars of monopoly money if you promise to keep posting on kitco..:D

SmPot
03-18-2011, 12:14 PM
Make it 1,000,000 and I'll go away! :p

talburtz
03-18-2011, 06:26 PM
http://www.bbc.co.uk/news/business-12787285

Can somebody explain WHY a country would want to weaken their currency under a SHTF scenario? I'm corn-fused.
In Japan's case in particular a strong currency will slash exports because a strong currency relative to other currencies will translate for many overseas buyers into high prices.

In the competitive global market if the exporting country has a strong currency there will be less demand for their goods as a result of the higher prices. A strong local currency particularly in Japan's case at this stage, and even before the triple whammy hit them, further savages their economy.

The Japanese economy was already only just maybe not back in recession prior to a week ago. Now it is certain to go into recession.

If you are interested and I take it you are consider the question why the yen is getting stronger following the catastrophe. One reason the yen is increasing in value is because institutions in that country have begun repatriating funds back into Japan. The reason they are doing that is because the money will be needed for pay outs in the months ahead, payouts such as insurance claims. The repatriation of funds back into Japan lifts the value of the yen. This will start a process of further fund repatriation, as banks and insurance companies seek to bolster their weakened capital position.

nickndfl
03-18-2011, 07:51 PM
A strong yen will enable the Chinese to dominate any of Japan's export markets (except cars & motorcycles).

talburtz
03-18-2011, 08:52 PM
A strong yen will enable the Chinese to dominate any of Japan's export markets (except cars & motorcycles).

China is certainly the elephant in the corner MSN is not mentioning. But you may be overlooking the significance of the loss of an export market to China. Japan is China's 3rd largest trading partner. Should Japan not be buying from China to the level they were its going to hurt China economically. China's economic boom has been very fragile of late.

Once austerity measures kick in proper in Japan as a result of the economic hit the domestic market for Chinese goods will pull right back. Perhaps the Japanese will be still buying basic Chinese grown produce in the markets, and they may be forced to overlook their reluctance to buy Chinese grown vegetables, fruit and meat. But many ordinary Japanese are not going to bother buying cheap electronic goods, domestic utensils, clothing for their kids etc all made in China. Japanese companies buying Chinese goods will be slowing down their orders for industrial goods also.

Any hiccup in the economic engine of China is going to be dire for the rest of the world. You should also consider the likelihood the coming recession in Japan is also going to be bad for the rest of the world. That country up until the earthquake/Tsunami/nuclear meltdown was the world's 3rd largest economy!

Japan's fall back into recession is likely to have severe repercussions for not just Japan, but for China and all of us.