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The Japanese Yen

Davey

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Okay, this isn't really news (how ever it is in the news a lot) but more a question.

I know that the Japanese economy is doing very well the last couple of years, and is getting more and more stable. Have a look at these threads:

Economy Is Improving in All Nine Regions, Bank of Japan Branch Chiefs Say
Japan's Economy to Keep Growing, BOJ Studying Prices, Governor Fukui Says
Future is bright for the land of the rising growth
Business confidence 'up in Japan'
Japan Economy Grows 3.3%, More Than First Estimate

But...


What is up with the YEN? Can anyone tell me why the yen is this low? I read something vagually about the "Bank of Japan" and interest rate, but I have not a lot of knowledge about economy. I am eager to learn about it though, so is there anyone who can explain to me a little bit more why the yen is this low, and how it can rise?
 

Mikawa Ossan

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I don't know much about such topics, but I do know that a weak yen makes Japanese exports much more competitive on the world market, so there is a big incentive for the Japanese government to maintain a weak yen, since exports are still, I believe, a large part of their economy.
 

frostyg02uk

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Hmm what doesnt help is the fact that Japan has no natural resources. Also its not really a main currency, so for example in the UK we use a reserve of Dollars (also Yen very recently) but because most countries use the $US as their reserve that means many people have bought plenty of it which shows an appriciation in the exchange rates, increasing its value.
In the UK we have major steel exporters and also we have the valueable North sea oil, because we have such rich natural resources the pound is very strong at this moment but Japan doesnt really have any. The interest rates also play a main part. I believe that in the US the interest rates are quite low at the moment so investors will benefit better by buying the £ and saving their money in the Uk banks as at the moment our interest rates are around 5.6%, rather then the usual 2%. Employment rates also matter. So low employment usually means higher inflation, which effects the interest rates also. I dont really know much about the Japanese economy so its hard for me to compare it to the UK E.G i dont know how much people use credit cards or get loans.

But i hope ive helped even a little.
 

Dogen Z

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Okay, this isn't really news (how ever it is in the news a lot) but more a question.

What is up with the YEN? Can anyone tell me why the yen is this low? I read something vagually about the "Bank of Japan" and interest rate, but I have not a lot of knowledge about economy. I am eager to learn about it though, so is there anyone who can explain to me a little bit more why the yen is this low, and how it can rise?


Well, according to the Big Mac purchasing price parity (PPP) index, then yen should be somewhere about 81 yen/U.S. dollar. BUT, that index is grossly oversimplified. When using a broader basket of commodities to measure PPP, we find, surprisingly, that the yen is close to its fair market value (think in comparison to living costs in London or NYC).

Regarding interest rates and f/x rates, there is supposed to be a good correlation between these two but oftentimes they drift far apart due to such things as politics, trade and current account balances, etc. That said, I would expect the yen to appreciate once the Bank of Japan starts raising its discount rate. Right now, the 3-month rate of Japanese debt is less than 1 % whereas it's close to 5% in the U.S.

F/X is a very tricky thing and you can easily get caught on the wrong end of a deal. I hope the mom & pop Japanese investors don't get caught. Remember what they say, "Bulls can make money, bears can make money, but pigs always lose.":)
 

Pachipro

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It's All A Game!

I understand where you are coming from Dave and it is a little difficult to explain so I will give you some links that may help answer your question.

Ocean Dude explained it partially, but he left something out: It all has to do with the "Yen Carry Trade" which is a big game among investors, governments and big corporations. You borrow yen for next to nothing and invest it in something that will yield higher returns or interest like US Treasuries. Then you take your dollar profits and repurchase yen and you win both ways in that it costs you next to nothing to borrow the money and then you can get more yen for your dollars when you convert it.

It's a way for them to make big profits without doing much of anything and it doesn't cost them either because interest rates in Japan are so low. I don't think it will last much past this year before we see the yen start to strengthen again and then you will really see some shake ups in the financial world. When Japan starts to raise interest rates look out.

You can read more here, and here concerning the Yen Carry Trade.

10 years ago I believe that the exchange rate was around 85 yen/US$. Now it's up to about where it was 18 years ago at 124yen/US$. If you understand the game that is played you'll have some idea what is going on and what will continue to go on.

In reality it has nothing to do with economics and reminds me of something I read about Franklin Roosevelt. One day he was with his advisors and he decided on a whim that he would raise the price of gold by 21cents. When asked why, he said, paraphrasing here, "because three sevens equal 21 and three sevens are lucky." That's how it was set then and I don't think much has changed since then.

I know the yen will strengthen again to around 100 yen/US$ or lower which is why I have started investing most of my money in Yen Money Market Accounts for my move back to Japan and anyone anticipating a move to Japan would be wise to take advantage of the weak yen now.

Hope this helps.
 

EmperorHirohito

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For those who might want to know, this is very current state on the currency markets. At the moment the UK Pound is on a 26 year high against the US Dollar, it currently stands at £1 will get you $2.0583, and against the Euro the US Dollar is near a record low of $1 will buy you E 0.7238.
The Pound is at a level of £1 will buy you 249.77 Yen, and $1 would buy you 121.35 Yen. and when it comes to the Euro and the Japanese Yen, at this time 1 Euro will buy you 167.66 Yen.

One thing I think you will see on the currencies markets is that the Pound is very strong and market traders are worried about the worsening economy in the USA.
 

frostyg02uk

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Indeed the US$ has been struggling for a while now. I think the interests rates due to the big spending last christmas has made the £ increase with no signs of that changing (interest rates).

from what i can see the Yen seems to be staying still but if the US$ keeps going down maybe there will be more investors in it. who knows.
 

EmperorHirohito

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Thats true Frosty, the US $ has been going down in value for the last few years, whereas the Yen has stayed relatively still in value but the good ole British £ has been getting stonger by the month. People are watching to see if America's economy turns into a nosedive into the red, no matter what Alan Greenspan can do they are scared the economy is heading for another economic crash.

If the money markets around the world do go into freefall it will not be nice and it will start in the far east with the HangSeng and the Nikkei stock markets crashing first.

It might make the crash of 1987 look like a mere little drop in the ocean.
 

frostyg02uk

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True, we could be on another depression. i think one of the reasons the £ is doing so well is because of the steel industries here and of course north sea oil. I wonder if the Iraq war has anything to do with the depreciation of the $US. I think at the moment someone like Easyjet are trying to get a contract with a few small airports in america to do cheaper flights (simular to european destinations). With the current exchange rate if that was to go through soon more people will be flying to america for their weekend shopping sprees, maybe that could boost their economy slightly.
I thought that recently the Nikkei were doing Ok, the FSTE doesnt look so well though compared to the others, there was talk of a merger between the two a few months ago after the FSTE turned down a talkover bid but if there is signs that the Nikkei could crash that will probably be off lol

PS did you hear what Brown did before when he sold (I think) 300million Gold reserves and bought US$'s and Yen...just before the price of gold went up and the dollar went down and down lol.....Greatest economist in the country my *** ^-^
 

Dogen Z

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Interest rates? Japan? Baaah.
Japan's interest rates are abnormally low ergo the popularity of the carry trade. Once Japan can definitely say that its economy is back on track again then interest rates should revert to normal and those who are still stuck in the carry trade will have to take a bath.

However, wage growth is still under pressure because companies are now trying to maximize profits for the most part to increase stockholder value. With wage growth under pressure domestic demand cannot increase so sales do not rise and prices remain under constraint.

However, a cheap yen helps the American economy by not contributing to inflation. If the yen becomes more expensive for the U.S., I would expect a U.S. recession and Japan would need to be more accomadative to the European market.
 

maushan3

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Thats true Frosty, the US $ has been going down in value for the last few years, whereas the Yen has stayed relatively still in value but the good ole British £ has been getting stonger by the month. People are watching to see if America's economy turns into a nosedive into the red, no matter what Alan Greenspan can do they are scared the economy is heading for another economic crash.

It's already in a recession, I am no expert, but I do know that one of the silent reasons the U.S. government is fighting in Iraq is because they need the oil to help pay for all of the problems the country is facing and of those problems is paying for the first generation of Baby Boomers who are beginning to retire. And the truth is that the government will not be able to pay for the retirements and these poor people wanting to buy retirement homes in South America and Miami will be in for a big surprise, they will need to keep working just to keep food on the table. It sounds harsh, but I blame the current administration for ushing the problem forward and making it bigger and bigger instead of resolving it now once and for all. But the worst thing is that the president's debt just keeps getting bigger and taxpayers will have to pay for it sooner or later. It is like a bad thing leads to a worse one and so on.

Mauricio
 

frostyg02uk

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Know what you mean there. If the dust is always swept under the rug your soon have a mountain. I think we are dealing with the same thing here. the current government have made sure that while they have been in power we havnt had a recession cause everytime we come close they borrow money and pay it away making sure the market never crashes. Which sounds great that no one ever suffers a recession but at what point do we pay the money back? The amount of taxes we pay since this government came to power has increased alot and thats probably down to the amount of dept we owe.(although recently we payed off the dept to america from WW2 so maybe we are getting somewhere).
 

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A little off topic, but once you understand the banking systems you'll have some idea what is going on and it is not nice.

Ben Bernanke said:
Bernanke is particularly interested in the economic and political causes of the Great Depression, on which he has written extensively. On Milton Friedman's ninetieth birthday, Nov. 8, 2002, he stated: "Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again." [7] [8] [9]

In 2002, when the word "deflation" began appearing in the business news, Bernanke gave a speech about deflation. In that speech, he mentioned that the government in a fiat money system owns the physical means of creating money. Control of the means of production for money implies that the government can always avoid deflation by simply issuing more money. (He referred to a statement made by Milton Friedman about using a "helicopter drop" of money into the economy to fight deflation.) Bernanke's critics have since referred to him as "Helicopter Ben" or to his "helicopter printing press". In a footnote to his speech, Bernanke noted that "people know that inflation erodes the real value of the government's debt and, therefore, that it is in the interest of the government to create some inflation." [10]

Since the dollar, for now, is the world's currency, let's look at how it works in the US. This may come as a shock to some, but the "Federal Reserve System" is NOT Federal and it is not a Reserve System. The Federal Reserve is a system of private banks and wealthy elites, with family going back to Europe, who formed the system in 1913 at Christmas time when the nations attention was diverted, and they lend money to the US government at interest. In order to collect that interest, the Federal Tax system was set up and the IRS was formed as a means of collecting that tax and making sure it is paid. Nearly 100% of your Federal with holding tax goes to pay the debt to these wealthy elites and none of it is used for the country itself. There are other taxes for that. Today, there is still no law on the books saying one has to pay income tax and neither was the ammendment to the constitution ever ratified by the states. But just try and not pay and see what happens.

The wiki link provided is not 100% accurate in that the entire truth is not being told, but enough was said to warrant a link. Look at the names of those that designed the system, follow their liniage to the past and into the present and you will understand who really runs the country and the world today. If you naievly think it is just market forces causing recessions and such you are sadly mistaken and uninformed.

Since the US dollar was taken off the gold system there is NOTHING to back it up. Zero, nada. The USD is a fiat currency as well as are most major currencies in the world today. The Federal Reserve can print up as much money as they desire. The Federal Reserve decides when there will be a recession and when there won't by the setting of their interest rates.

Just look at how the world reacts when The Fed chairman speaks. Just the other day Fed Chairman Bernanke said that the sub-prime mortages in the US may be in trouble. Then Countrywide Mortage (The largest in the US) said they were in trouble and the market tanked over 400 points in three days with repurcussions around the world. Today it is down another 100 as I write.

One of reasons the United States is not bankrupt today is because of the Fed's easing of requirements for borrowing which has kept the US economy afloat these past several years, but it is coming back to bite them with the huge forclosures of these sub-prime mortgages that allowed those without the sufficient income to get adjustable rate mortgages at rediculously low rates 3 years ago. The same holds for those that used their home as an ATM and received home equity loans Those rates are now climbing and people are seeing their mortgages/home equity loans go up several hundred dollars per month which they cannot afford. In yesterdays LA Times it was announced that forclosurers are up 800% over last year.

Sadly, the US is a debtor nation with the average American being over $112,000 in debt including their mortgage, and the average Amereican having over $8,500 in credit card debt for which they make minimum payments at an average of 18% interest. They are just following in the footsteps of the government which now has the greatest debt and trade deficit the world has ever seen.

Another reason the US is not bankrupt is the $3 billion/day of US Treasury bills that China and Japan buy each day!

The same goes for Europe and their Central Bank. It is all a game these people play an we are the pawns.

It's the major banks and The Wall Streets of the US and Europe that run the world and NOT the president or Prime Ministers. They too are pawns and do the bidding of these elites.

Is it not strange that the Secretary of the US Treasury and the head of Japan's Finance system both worked for Goldman Sachs?

Therefore, in keeping with the topic of this post, when "THEY" want the yen to be strong, it will be so. When they decide it shopuld be weak, it will be so. The same for the pound and the Euro.

Before you go flaming me on how crazy I am, do your homework first because I have the ammo and 15 yrs research to back me up. For starters you should read "The Mythology of Money-The Story of Power" and "Rule By Secrecy". If these two books don't give you the info you need and prove that everything you have been taught and "know"" is a lie then there is no convincing you and you can join the other sheeple of the world.

“Permit me to control the money of a nation, and I care not who makes its laws.” – Mayer Rothschild, Patriarch of the Rothschild family.

Google it!
 

frostyg02uk

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Thats interesting but i have a question. If the reserve keeps printing money at any rate they wish....then would'nt money become invaluble. Like in Russia a few years ago (when their banks went bust) and bread was being sold at stupid prices. If these people make so much money just off interest rates are they in the list of the most rich? I mean "if" the government said screw you im not paying what would be the conquences of that? If they can raise the price of the exchange rates at will why would they ever want the rates to be low?
 

EmperorHirohito

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What you describe is called 'Hyper Inflation' Frosty, if the Bank of England kept printing money non stop the currency is devalued a great deal. The idea of paying £10 for a loaf of bread is something I dont want to imagine. Off to check the markets, they have all had the jitters this week.........
 

Dogen Z

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Pachipro san, forgive me for disagreeing. But, any currency can be used as a claim on the assets of the country that produces it. So in the case of the U.S., a US$ is worth a part of an Ipod or a Boeing 787. If the economy of that nation is doing well, then the currency is usually strong. Central bankers can influence the exchange rate to a degree just by talk or by actual intervention BUT the currency market is HUUUGE involving trillions (not billions) of dollars per day. So unless a currency is pegged, its exchange rate is detemined largely by suppyly and demand and by market sentiment. (BTW, I thought Bank of Japan Governers were always groomed in-house. I'm surprised that they would bring in an outsider from Goldman Sachs.)
 

Mars Man

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Anyway, speaking of 'yen'...I don't seem to, and never seem to, have enough to go around anyway....so ? What's with the YEN's not being IN my pocket? hee, hee, hee....
 

Pachipro

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Ocean Dude said:
Pachipro san, forgive me for disagreeing. But, any currency can be used as a claim on the assets of the country that produces it.
Not really true. As the US currency is a fiat currency, meaning that there is nothing (including assets and or gold/silver) to back it up, it cannot be used as a claim on assets.

The ONLY form of currency in the US that is backed by hard assets is US Treasury Bills (T-Bills) which is why they are auctioned off. With Japan and China buying nearly $3 Billion/day, they are, in effect buying up the US. The USD? Not even worth the paper it is printed on if the Federal Reserve decides it.
 

Pachipro

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frostyg02uk said:
Thats interesting but i have a question. If the reserve keeps printing money at any rate they wish....then would'nt money become invaluble.
In effect, yes. A fiat currency is not worth the paper it is printed on. It is only worth something when people agree to accept it and, to keep the nations of the world accepting it as the world's reserve currency, there are more than 100 US military bases around the world to make sure it remains that way.

Russia only went bankrupt because it was decided among the elites that they would stop accepting it and would only deal in US$ or pounds/Euros. The same thing can happen to the US, Japan, or Europe if they decide it.

Is it not strange that Iraq was invaded only after Saddam Hussein decided that he would no longer deal in US$ but was switching to Euros for the sale of oil? Iran is now threatening to do the same thing. The game continues!
 

Dogen Z

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Eh? All Federal debt issues, from T-bills to 10 yr T-bonds, are sold in auctions, except double E savings bonds.

Anyway, if you feel your US$ is not worth anything, please send me any amount you have to me. :p I would be much obliged.
 

Pachipro

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As long as it's accepted, it's worth something. When it is no longer worth something I will be glad to send you all that I have. LOL
The Hidden History of Money said:
6) National Currency Paper (Fiat Paper Currency): these paper notes are created by the BankLords (the process is called “monetizing a promise to pay”) and actually contain nothing valuable if compared to their face value; the paper contained in a one dollar bill is hardly worth a penny. “Fiat paper notes” are an “I owe U”, like tokens or claim tickets or shares or stock certificates, and they must be accepted anywhere in the U.S.A. in exchange for goods or services, or in the case of foreign governments by the power of military might and threats from the US government who is acting on behalf of the BankLords to force foreign governments into accepting the Federal Reserve Paper Notes and holding it as a reserve currency (why else does the US have around 1,000 bases around the World? Its merely doing the bidding of the City of London square mile BankLords who have a new military power at their disposal after British imperial power was found to be insufficient to control the entire World). By the power of fraudulent legislation, these notes are created by the private BankLords at no liability to themselves via the privately owned Federal Reserve central banks and commercial banks. The currency notes are an “I owe U” representing a national debt owed by the citizens of the country to whoever holds the currency or Treasury Bonds or Bills or other types of “Promises to Pay” against which these notes were issued. The BankLords who own the privately owned Federal Reserve banks and Commercial Banks and issue the notes for the cost of printing them have no liability because they have passed it on to the taxpayers by issuing this national currency. In the past, US Banks issued their own private currencies; however, the Bank of England issued national currency since its start in 1694 and has thus been enslaving people since a longer time). Thus, whenever money is created by the BankLords, the debt is collectivized and passed on to the taxpayers as a whole. A VERY BIG FRAUD! If the currency had been issued by the government on behalf of the citizens as it should be, it would have been debt free and interest free while circulating within the country. The BankLords have usurped our lives by using us as collateral for the national currency which theyissue. The ancient word for this is slavery.

7) National Currency Account (Fiat Currency Account): these bank accounts actually contain nothing valuable if compared to their face value; the cyber computer database bits/bytes storing the value of your bank account are hardly worth a penny. “Fiat currency” is like cyber or computer tokens or claim tickets or shares or stock certificates. It’s the same situation as in above.
 

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I hate correcting someone living in Japan, but "Yen" is an incorrect representation of the currency with "En" being the correct representation.
 

Pachipro

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Shillelagh said:
I hate correcting someone living in Japan, but "Yen" is an incorrect representation of the currency with "En" being the correct representation.
I think we all realize that. In English it is written and pronounced as "yen". In Japanese it is written and pronounced as "en" Since this a board in English, "Yen" is perfectly suitable.
 

Dogen Z

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I hate correcting someone living in Japan, but "Yen" is an incorrect representation of the currency with "En" being the correct representation.

I beg to differ. If you want to use the correct term in Japan you should say, "窶ー~" . If you can't read that or post the rest of your message in Japanese, you should take Pachipro's advice.

BTW, I hope no one here was caught on the wrong side of the dramatic yen trade climb. I wouldn't want to be the treasurer of a giant Japanese export company right now. But I guess such a person would have had the savvy to buy a lot of put options and made a killing on the financial side to offset the loss on profits on the operational side. I don't think it's over yet. We're going to see gyrations back and forth. Economists predict the yen will end up anywhere between 125-112/US$ by the year end. I just read it was trading at 114 in NY today.
 
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