The biggest group in Japan that welcomes the decline of Japanese
Yen against US dollar to the level of $1=¥100 would be math haters, because
it’s easy for them to calculate exchanging rate. Nevertheless, the news reports
focused on another group, the exporters. Although this trend in foreign exchange is
generally recognized as favorable result of Abenomics, more people are getting
skeptical on this market-oriented economics. Negative aspect of the steep
recovery is looming.
Japanese economic correspondents sometimes report only the
positive side of economy. Most reports explained the reason of Yen’s decline as
a consequence of bold monetary ease led by Prime Minister, Shinzo Abe, and the
Chairman of the Bank of Japan, Haruhiko Kuroda. Although they actually made a
momentum of this trend, recent moves of foreign exchange has been motivated not
by the policies in Japan, but by the recovery in US economy. It is not Yen’s
decline, but US Dollar’s hike.
The point now is how to maintain this rate. If US Dollar
keeps on appreciating, the impact on importers in Japan will be devastating.
Although both Abe and Kuroda are optimistic about their handling of monetary
policy, Japan has no power for controlling US economy. Market may
uncontrollably harm Japanese economy. Are they buying Japanese Yen, when the
market heats up? The effect will be limited. It is false manipulation of
foreign exchange, anyway.
Pressures from overseas are coming. Group of Seven meeting
by financial ministers and monetary leaders, started on Friday, is expected to
discuss foreign exchange. Frustrated by independent decline of Japanese Yen, G7
is going to reconfirm to avoid competitive cheap currency. It is unclear
whether the parties accept Japan’s explanation that the monetary ease was aimed
at domestic effect, not foreign exchange.
The rate of long-term debt is ominously getting high. Debt
market in Tokyo sees a trend of investors to shift money from debt to stock.
The Ministry of Finance reported on Friday that national financial debt hit a
new record of ¥991 trillions at the end of FY 2012. Once national bond loses
its credibility, it may follow the same course as Greece.
As long as stock market is rallying, people are optimistic
about negative side of current economic policy. Increase of commodity prices,
however, is steadily harming people’s lives. Although the government expects 2%
hike of commodity prices, it does not include the impact by the rise of
consumption tax rate, 3% next April and additional 2% on October 2015. Wage has
no indication of rise so far. No exporter who welcomes this cheap Yen seen so
far, except carmakers.
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