Analysis: Who Reaps Most from Debased Yen?

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Last updated at: (Beijing Time) Tuesday, January 15, 2002

Analysis: Who Reaps Most from Debased Yen?

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Last year saw a 15.8% depreciation of Japanese yen and even as much as a 6% cheaper debased rate by it to USD last December. Yen has been irremediably weak for a most deteriorated economy is developed according to the Japanese government, and on the verge of cyclical deflation and an asserted weak circulation of yen by Shin Nakahara with the Bank of Japan December 12.

On December 14, Heizo Takenaka, Minister for Economic and Fiscal Policy of Japan directly called for a more flexible monetary policy to be introduced by Japan�s central bank for structural reform had just started he said.

It must be admitted yen has been debased at an unprecedented bigger rate than is needed for a deteriorated economy developed. An appreciation of fixed assets and worth value of securities has resulted in a rapid shrinkage of people�s wealth involving a loss of 6.7 trillion yen of land assets and a cut of 8.8 trillion yen of stocks without doubt. But of these not much impact has been produced on normal operations of the Japanese economy.

As things are now with Japan, it still maintains a much high per-capita GDP averaging 37600 yen, ranking world second. Its manufacture is much far from presenting a dark picture as what the Economic Financial Minister Heizo Takenaka has painted in a state �seriously hollowed�. Back on December 20, Professor Hajime Karatsu with the Japan's Tokai University said that Japan�s manufacture as its liquid crystal display, photosensitive and a series of other related hi-tech lines has achieved a 20% growth in 2001. In such sectors as super precision manufacture Japan also pioneers and leads the world.

It goes without saying Japan�s economy is far from being in deteriorated state as has been asserted by its government. This is because Japan is still the biggest Asian and world economic power. Yen as a currency drastically debased just testifies to an overreaction on the part of government authorities on the Japanese economy.

A debased cheaper currency like yen may bring some transient benefits but can by no means help a genuine growth of the Japanese economy. A fact giving food for thought is that the US instead of Japan is to reap the most from debased yen. According to statistics by the Credit Suisse First Boston, the US is favored at least by a two thirds of global bank deposits. A fact was that back in the 1990s, the US had been helped by a huge amount about 72% of world deposits.

A study report by University of Michigan of the US shows that by 2003 the US will have a constant deficit of over 600 billion USD. From this one can see that if without an inflow of so much money as of over 700 billion USD of international capital the US

would be found in a situation hard to make both ends meet. This is why to maintain the stability of USD and to work for an incessant inflow of international capital is of paramount importance to the US. An appreciation of Japanese yen has just been in the way to help build up the bull position of USD.

There is a complexity of causes behind debased Japanese yen and this will in no way further the interest of Japan itself, not to say the East Asian countries and the world economy as a whole. To conclude, there is every necessity for Japan to adopt practical measures to honor its commitments and obligations to maintain a stable market of yen.

By People's Daily Online

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