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USDJPY Conundrum

Yesterday the yen reached the postwar record high against the dollar.

Yet, Japan’s budget deficit is higher than tax revenues, before accounting for the recent tragedy. They are spending more than twice what they can afford, with the rest being borrowed or soon to be fully monetized by Japan Central Bank.

How suddenly the flight to safety into the yen will transform into a currency crisis will be shocking to most. A couple of interesting links from the FT: FT.com / Markets - Yen strength is likely to prove short-lived and Japan’s megabond tremors.

Tags: japan yen USDJPY currency finance JGB government debt

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Oct
17th

Sun

Basically the key has to lie in reducing the wealth imbalance which exists between the developed and the developing world, but this is likely to prove to be a rather painful adjustment process for citizens in the planet’s richer countries, so policy makers are somewhat relectuntant to accept its inevitability.

— An Unusual But Interesting Argument Which May Help To Understand Why QE2 Is Now Almost Inevitable | afoe | A Fistful of Euros | European Opinion

Tags: emerging markets economics US euro dollar yen japan europe germany global imbalances trade balance

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Nov
30th

Mon

Who Is Betting On The Yen?

Betting on the currency of a country on the verge of bankruptcy is an interesting play. But traders are betting on the yen as we speak. It sure could work on a short term basis, but I still think that Japan will face the wrath of the bond market in the next 18-24 months.

But I am not a trader …

Tags: japan yen dollar

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Mar
18th

Wed

Visual chart above leaves few doubts about the issue with Japan.

From John Mauldin’s weekly E-letter:

While Toyota is the world’s largest car company, auto sales in Japan peaked 18 years ago. Supermarket sales have fallen every year for the last 11 years. This is a country in a long-term decline, with massive debt. While there is still a lot of economic power there, it is not the country of the future. Unless they figure out how to grow their population, it will be a long slow slide.

Tags: japan exports trade deficit yen decline

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