With apologies toThe Weather Girls), it’s now raining Yen! Japan has opened a new front in the ‘currency wars’, a term coined by Brazilian Finance Minister Guido Mantega in 2010.
The US, UK and Switzerland are already enjoined, with Europe likely to take up arms shortly. Nations which constitute around 70% of world output are ‘at war’, pursuing policies which entail devaluation and currency debasement.
In a shift to economic isolationism, all nations want to maximise their share of limited economic growth and shift the burden of financial adjustment onto others. Manipulation of currencies as well as overt and covert trade restrictions, procurement policies favouring national suppliers, preferential financing and industry assistance policies are part of this process.
Central banks are increasingly deploying innovative monetary policies such as zero interest rates (ZIRP), quantitative easing (QE) and outright debt monetisation to try to engineer economic recovery.
Thanks to BrotherJohnF