Sayonara, Mr. Yen

Before China kept its currency artificially devalued, Japan was the biggest advocate of a weak currency. Eisuke yenSakakibara, Japan’s vice minister of finance for iternational affairs, was such a staunch proponent of a weak currency that he earned the nickname Mr. Yen. Japan’s export led growth was predicated on a weak yen, so its interesting that anyone would write in the New York Times that Japan should let the yen appreciate.

Japan definitely needs to let the yen strengthen, but the argument can be applied to almost any strong Asian economy. Most of the “Asian Tigers” built their economies on an export based strategy. Unfortunately this resulted in a savings glut and that money eventually found its way to America and other developed countries. Now we could run higher deficits and take on debt. The global imbalances are a big reason why mortgage  defaults in Florida have created a global recession and a move toward more domestic consumption in Asian countries would be a welcomed change

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