What is going to be the next trick to keep the Japanese Yen cheap?

BoJ's Harohiko KurodaWell, Japanese friends (don’t actually think I have any), looks as though your very own Bank of Japan (BoJ) at the behest of its master the U.S. Federal Reserve, just yanked the carpet out from underneath your productivity. Cheap currency has created artificial growth by giving away any real goods that have been manufactured in Japan in exchange for IOU (I Owe Yous), or paper debt obligations that will never be repaid. Toshiba paid the price. This giant Japanese conglomerate is letting go of 7,000 employees beginning this year at one plant. Haruhiko Kuroda, Governor of the Bank of Japan after returning from Devos, Switzerland last week, said that the BoJ “was out of ammo”.

I guess while being in Devos (the nexus of central banking) Haruhiko Kuroda was given his instructions. Kuroda was in Devos for the “The Global Economic Outlook” at its annual meeting of the World Economic Forum (WEF) on January 23, 2016. While at Devos, Bank of Japan Governor Haruhiko Kuroda said he would “scrutinize various factors, including the effect of global market turbulence on Japan’s inflation expectations, in deciding whether additional monetary easing was necessary.” That was for public consumption. Now comes the reality: The BoJ can’t magically come up with any more cash which means the BoJ can’t help the fed anymore. Hope the peasants have plenty of cash on hand to hold them over?

Source: Zero Hedge

The Bank Of Japan Has Betrayed Its People

February 2, 2016

The Bank of Japan’s unexpected rate cuts to negative are a desperate attempt to help out the FED and to support the dollar at the expense of the aging Japanese population.

The negative market reaction to the FED’s rate hike of December shows that investors do not believe an economic recovery in the US is underway. Two reasons make central banks start to raise interest rates.

The first is that economy is doing well, and central banks have to prevent an overheated economy. But it is also a signal to investors everything is going well. In this situation, the first reaction of investors will be the opposite as central bankers planned they will and increase their investments and markets will go up.

The second reason central banks raise interest rates is the defensive one; the moment the economy is out of control, investors are beginning to abandon the sinking ship. The continually increasing interest rate has the task of keeping the investors aboard. Central banks in less developed economies raise rates to defend the national currency, thus preventing investors from fleeing. An increase in the interest rate can add fuel to the fire and in many cases has the opposite effect. Investors start smelling angst of the authorities and start abandoning the sinking ship. In such a situation stock markets are coming crashing down because investors withdraw from them.

We saw this last pattern happening in the US economy after the December FED’s rate hike. As a result, the dollar-yen exchange rate is starting to decline, with the value of the dollar falling off as Japanese investors start panicking and fleeing the US market. Surely, Japanese investors know that a rate hike without an accompanying economic growth will erode every existing investment.

There is a general misconception according to which countries drive their currency down to generate growth. People adhere to the simplistic belief that a weak currency drives exports and helps the nation to prosper. The fact is that a cheap currency creates growth by giving away real goods in exchange for IOU (I Owe Yous) or paper debt obligations that will never be repaid. The US is the beneficiary or the receiving end of the weak yen policy. Because the US continues to maintain its world hegemony, it needs a strong dollar. A strong dollar makes everything the US empire buys in the world cheap. A strong dollar causes the world to be willing to exchange real goods for printed paper dollars that have no intrinsic value, and that are issued by a country that does not have the industrial capacity to ever repay what it owes its debtors.

The endless trade deficit the US has with Japan shows how the Japanese are prepared to provide the US with real goods without demanding tangible goods in return. Because the international press publishes trade data in dollars, the trade balance deficit seems to have been shrinking over the last years. The actual situation becomes apparent if we look at the trade deficit in yens.

Please go to Zero Hedge to read the entire article.


2 thoughts on “What is going to be the next trick to keep the Japanese Yen cheap?

  1. I havent had a lot of j male friends over the years either. Dont sweat it.

    The yen will continue to rise and it will rise faster than before because the interest rate is now higher which will bring forex into Japan at increasingly higher exchange rates.

    On the surface it seems like an inconsistency that a country with a decreasing population and decreasing economic output enjoys a persistantly strong currency. The reason in my opinion is that most people who really understand this stuff know that the Japanese economy is and may always be a safe long term bet. Your recent blog on Blackstone supports this.

    • Correct. That’s the way I see it, and I also think the Japanese are attempting to break from their masters in Devos and the Anglo-Americans but under Abe that won’t be even remotely possible. Might explain Japan going on the “offensive” with their military buildup and provocations with China and North Korea. Won’t go as a far as a “safe long term bet” just yet though.

      Japan’s corporate governance desperately needs reform for any more confidence that has been shaken with Toshiba’s cooking the books and laying off 7,000 employees. That’s only Toshiba. Now Toshiba will go into further debt to pay off that mistake. And what is Toshiba doing in Belgium I wonder?

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