Super-Strong Yen Is Crushing The Japanese Economy

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Photo: eblaser via Flickr

The US dollar has been plummeting to new lows against the yen, and officials there continue to make noises about staging an intervention.Officials are worried about the impact that a strong yen would have on the Japanese recovery, as the country continues to struggle to recover from the March 11 earthquake and tsunami.

Automakers like Nissan Motor and Toyota are bucking, not just under the impact of the earthquake, but rise of the yen. Eiji Hirano, a former BOJ executive director, who is now executive vice president at Toyota Financial Services Corp told Bloomberg

“The strong yen is the biggest uncertainty facing Japan’s economic recovery… Japanese companies were doing all they could to get back on their feet, helping the nation rebound faster than expected — the strong yen could kill all of the optimism that was built up on that.”

Of course, the fear is that stronger currency = lower margins and less competitive exports.

The track record for intervening, however, is pretty spotty.

Its first massive intervention took place in 2004, with the ministry of finance spending nearly $145 billion in the first quarter of the year. In September last year, Japan intervened again, to rein in the currency. That didn’t do anything. They tried again after the earthquake, again to little effect

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