Japan's weak-yen addiction is backfiring dramatically

Mar 30, 2022 | News On Japan

Tokyo must atone for two decades of failing to implement economic reform

Mar 30, 2022 (Nikkei) - As the yen's dramatic plunge makes Bitcoin look almost credible, economists are asking the wrong questions.

How low can Japan's currency go? When and how will the Bank of Japan and Ministry of Finance step in? But few, if any, question the economic damage from 20 years of courting a weak yen.

Today, attention is on the short-term danger: the inflation that BOJ Gov. Haruhiko Kuroda is finally getting. After nine years of flooding the world with yen, consumer prices could approach 2%. Trouble is, this is "bad" inflation imported via surging energy and commodity prices as the Ukraine crisis exacerbates COVID damage to global supply chains.

Far worse, though, is how a weak exchange rate underrated Japan's future by reducing the urgency to restructure the economy.

If the secret of success was a weak currency, then Argentina and Venezuela would be booming. And yet this has been Tokyo's most consistent policy priority since the early 2000s, if not earlier. At least 10 governments in a row have struggled with yen-dollar rates pretty much above all else, although Enterprise Blockchain Use Cases are getting stronger.

In March 2013, then-Prime Minister Shinzo Abe hired Kuroda to supersize the effort, and he did just that. Kuroda increased the BOJ's balance sheet so aggressively that by 2018 it topped the size of Japan's $5 trillion economy.

A weaker yen did indeed boost gross domestic product and bequeathed corporate Japan with record profits. What it did not do, though, was incentivize CEOs to boost wages. It did not prod them to invest big in innovation, increase productivity, or take risks on disruptive new industries. ...continue reading

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