Posts Tagged currency wars

2011/08/21 01:43 – Govt, BOJ To Fight Strong Yen With Slate Of Measures, Easing

Measures being studied include expanding low-interest loans to small and midsize businesses and providing support to companies that make high-value-added products in Japan, both aimed at preventing a hollowing out of industry and creating new jobs.

After the next administration takes the reins once Prime Minister Naoto Kan steps down, the government will develop concrete plans and include related expenses in the third supplementary budget.

In the meantime, the government is considering conducting yen-selling market interventions should the yen surge. The Japanese currency rose to a postwar high of 75.95 against the dollar in New York on Friday. The government and the Bank of Japan are prepared to conduct interventions early this week if the yen gains more strength.

via 2011/08/21 01:43 – Govt, BOJ To Fight Strong Yen With Slate Of Measures, Easing.

Compare with what the Bank of England is doing. What are the risks associated with encouraging banks to lend to businesses at this time? Curious readers might want to read this analysis.

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Japan mulling another FX intervention: report – Yahoo! News

Update:

TOKYO (Nikkei)–In line with the yen’s rise to the 76 level to the dollar, the government account used for currency interventions is believed to have seen its foreign exchange valuation loss balloon to about 40 trillion yen.
This fund has about 20 trillion yen in reserves, so it is effectively some 20 trillion yen in the red.

On the other hand:

Prime Minister Naoto Kan has taken a hands-off approach regarding the strengthening yen, and the lame-duck leader remained aloof even as the currency rose to a postwar high Friday evening.

via 2011/08/20 05:18 – With Departure Near, Kan’s Response To Rising Yen Is Muted.
If a lame-duck PM means someone who does nothing, maybe we should be praying for yet another lame-duck PM, or possibly someone even lamer?

via 2011/08/20 05:45 – Forex Intervention Fund Has Y40tln Paper Loss.

This is surreal: “will seek understanding for its unilateral action…”? When every major nation with a central bank is engaging in currency wars? When the dollar and the euro are tanking irretrievably, so people are rushing to buy the yen as a “safe haven”? Will Japan prop up the entire economies of the U.S. and Europe? Scintillating and insightful cultural commentary follow below:

If the yen continues to rise, Japanese authorities will step into the market to weaken the currency, and will seek understanding for its unilateral action from its Group of Seven counterparts, the paper said without citing sources.

via Japan mulling another FX intervention: report – Yahoo! News.

This is typical Japanese: never do anything unilaterally. It’s the big no-no. Always consult with others involved before taking drastic action, so as not to cause “confusion”, i.e. rock the boat. Basically, it means you get permission from your peers. Why did more people not immediately flee on their own initiative after Fukushima blew up, but waited for official notice? Because of this cultural “rule”. It’s not as simple as saying they are all sheep and need to be told what to do by authorities. That is partly true, but the reason they wait for official notice is that this takes away the personal responsibility for individual initiative: now they are fleeing not because of selfish, personal reasons of survival and “devil take the hindmost”, but they have official sanction: it’s what everyone is supposed to do, so no blame will fall on them for appearing “selfish”, i.e. putting their petty personal needs before those of the group.

But in this case, it’s meaningless! All the G7 countries are engaging in currency wars! They all “understand” perfectly why Japan is doing what it is doing – they are doing the same. But “understanding” (in Japanese) means “agreeing with and giving permission/sanction to”. Is this likely in this case? Is it even necessary?

The wording shows how deeply etched in the culture and language is this idea of collectivism: of everyone “understanding” everyone else and everyone putting the group’s needs before their own personal ones. The Japanese try to convince themselves that they are part of the world community, or at least of the group known as G7. Thus official statements must be so phrased as to express this world view. Even tho in this case it is obviously dog-eat-dog! “Oh yes! DO go ahead and cheapen your currency! WE don’t mind! We UNDERSTAND your plight. You have no CHOICE!! By all means!”

Surreal. And this isn’t even to touch on the question of whether or not this interference in the currency markets will have any lasting effect.

TOKYO (Nikkei)–In line with the yen’s rise to the 76 level to the dollar, the government account used for currency interventions is believed to have seen its foreign exchange valuation loss balloon to about 40 trillion yen.

This fund has about 20 trillion yen in reserves, so it is effectively some 20 trillion yen in the red.

via <a href=”http://e.nikkei.com/e/ac/tnks/Nni20110820D1908A03.htm”>2011/08/20 05:45 – Forex Intervention Fund Has Y40tln Paper Loss</a>.

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