Change is more than a six letter word. Sometimes it actually means something. Witness the recent electoral success of the Democratic Party of Japan (DPJ) which defeated the longstanding incumbent Liberal Democratic Party (LDP) a little over two weeks ago.
Hirohisa Fujii, former finance minister and a DPJ member, heavily hinted that there will be no currency debasement of the yen. Mr. Fujii is widely believed by analysts to become the next Finance Minister (again).
These remarks were made in the context of the surging USD/JPY pair trade which is good for Japanese consumers but bad for the exporter heavy Nikkei index. Traditionally, a stronger yen is indicative of deflation. But in the current economic climate, the yen's strength is due more to dollar weakness.
Something else to consider is that Japanese policy makers probably concluded they had no hope of matching dollar debasement - the program of structured finance buyouts in the form of POMO (permanent open market operations) and TOMO (temporary open market operations) whereby the Federal Reserve subsidizes the CMBS and RMBS market does not exist in Japan.
http://online.wsj.com/article/SB125291498559508171.html
Tuesday, September 15, 2009
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