Normalization of the weak yen

Before the black boat Leghorn in 1853, Japan was a closed agricultural society, the rice self-sufficiency, the madding crowd. Gen. Perry's arrival broke the previous balance, a night of opening up of the Japanese economy, the need to compete with other countries in the world. When Japan entered the industrialization process, become the soft underbelly of the development of resources and markets.

Japan first spent five years trying to expand the market through war and colonization, to grab resources, this strategy is a complete failure as the World War II defeat. The subsequent four decades, through trade, to seek survival and development of the Road. Postwar global economic prosperity and Japan improved process procedures, the Japanese manufacturing popular in the world, to create a glorious. However, the two oil crises, the global economic boom faded, protectionism, Japan's export-led economic model is blocked, are forced to the sharp appreciation of the yen, on the one hand, to create a domestic asset bubbles, on the other hand, the production line round the relocation. After two decades, Japan's domestic economy is weak, and overseas operation is still considered brilliant. But with the global financial crisis and China's anti-Japanese production line relocation business model is also being challenged, the rise of the emerging economies, but also Japanese abdominal highly enemy. More worrying is the relocation of production lines eliminated domestic jobs, young people can not find jobs, forced to retrench consumption, Japan's economy, the society entered a downward spiral, sink deeper and deeper in the quagmire of recession, no extricate themselves.

In order to break the vicious cycle, from manufacturing jobs to proceed, so that companies are willing to invest, consumers have the ability to consume. The high exchange rate, which is in fact difficult to do. Certainly in the exchange rate to jump out from the death trap it a shot. In this sense, said that after Shinzo Abe, do not do other Japanese politicians will do sooner or later, just as Abe economics a little more crazy.

The the crazy Abe select a crazy black Tianzuo central bank governor, let a show more spectacle, more suspense. Kuroda past critics of Japan's monetary policy, and its powerful position on the exchange rate and the Ministry of Finance background is bound to make Abe stare inflationary policies will be adhered, the Bank of Japan is likely to be the quantitative easing policy in the next few years the world champion.

Abe, Kuroda QE policy has not been substantive action, but the short-term effects are already visible. The sharp depreciation of the yen, the stock market hit record highs, improved corporate earnings, even as consumer confidence is also enhanced. Local real estate market started to rebound in commercial property prices, domestic funds, overseas funds have been pouring into the housing market, seek yen asset reflation (re-inflation).

However, the core issue of the Japanese economy did not rise in asset prices, Abe popularity high and substantive solutions. Still lingering economic downturn, ambitious over-investment of the funds of the speculative color color, the aging of the population, insufficient domestic demand imprison illness is not in addition to, discourage business investment.

In addition to the monetary / exchange rate policy, Japan needs structural reforms need to eliminate economic barriers to break the inertia in the policy. This leads to the constraints of interest groups, and mostly from the ruling Liberal Democratic Party.

Employment generation can only be re-created from the manufacturing sector, which requires stable political / policy environment, the need to improve the long-term demand outlook also need an ongoing profitable exchange rate environment. For businesses, a moderate, stable exchange rates is even more important than the drastic devaluation. I believe that after a drastic devaluation of the Japanese government hope that the normalization of the weak yen. Over the past two decades, the Japanese yen against the U.S. dollar hovered between 75-95; over the next decade, the yen range may be between 95-115.

The depreciation of the yen, the United States recognized that hard to do, the White House was surprisingly silent. Abe's exchange rate policy through quantitative easing, so the same QE hard to occupy the moral high ground. The same time, the United States believes that the recovery of the Japanese economy, and good for the global economy and U.S. strategic interests. U.S. dollar itself has been completed by the devaluation of the appreciation turned weak yen is relatively limited economic recovery in the United States have been at impact. As long as Congress does not appear fierce protests, the U.S. government against the yen "moderate" devaluation tolerant attitude.

The long-term impact of the weak yen on Japan's economy depends break the the enterprise hold out inertia. A large number of Japanese companies sitting on huge amounts of money, but are not optimistic about the economic outlook, reject Investment Industrial. The inflation expectations whether money into the real economy, create employment and support consumption, still uncertain of the number of. The aging of the population, nor eliminate barriers to production line outside innovation capacity decline.

Weak yen in overseas capital markets is bound to bring more liquidity to boost financial asset prices, continue to be of the yen carry trade liquidity supply source. For the real economy, a weak yen may constitute impact on the manufacturing outsourcing model, will make regional free trade agreements become more important.

The weak yen also increases the risk of the Japanese economy. Due to the closure of the nuclear power plant, Japan's structural trade deficit, the depreciation of the yen so that the cost of energy imports surge, the trade deficit nearly doubled. The yen devaluation policy to disorderly risk of violence derogatory increase. Furthermore, the Japanese government debt and deficits are at high-risk state, once inflation will make the significant increase in the cost of the issuance of treasury bonds, the JGB market crash risk is also high.

Nevertheless, driving down the yen the Japanese government's attitude is very firm, weak yen may be normalized, QE might normalization. If this is the case above, the Japanese house prices will rise.