(Bloomberg BusinessWeek – Simon Kennedy)
Japan’s yen intervention may be a bad omen for global trade
On Sept. 15, Japan sold yen for dollars to slow the yen’s climb to a 15-year high against the dollar. Japan decided to take on the market to protect its exporters from the devastating impact of the super-yen. It’s a logical move, from Japan’s point of view. Yet it exposes a flaw at the heart of the current global recovery effort: The world’s major industrial economies can’t all export their way to prosperity.
Governments from Tokyo to Washington are counting on exports to keep their economies growing at a time of painfully high jobless rates and record budget deficits. The danger is that the race to hand companies such as Hitachi and Boeing an edge in the international marketplace will lead to a series of currency devaluations and protectionist measures that threaten global growth – a reprise of the 1930s-era beggar-thy-neighbor trade policies that worsened a global depression. Read more here.
