Bloomberg this morning
Japanese finance companies will market more than 1.5 trillion yen ($12.1 billion) of foreign-currency investment trusts before month-end, according to data compiled by Bloomberg. The funds are aimed at individuals seeking higher yields.
Hegel once famously said that "theory is grey bu life is green". Here we have another very clear example of just how right he was. We are still far from understanding what the long run implications of all this are likely to be. But open a tear in hyperspace, and through they go.
In one sense what is happening is an enormous rebalancing, since "underheating" in domestic demand in some elderly economies (Japan, Germany, Switzerland) is feeding through to "overheating" is domestic consumption in some younger developed countries (New Zealand, Spain, Ireland), some Eastern European economies with structurally damaged demography (Latvia, Lithuania) and in dome new young developing economies (India, Thailand, Brazil). What is curious here is that since Japan needs to maintain growth (and this means export growth) to keep the fiscal deficit from going completely out of control (some current estimates put the present deficit at around 170% of GDP) then the Japanese economy is the direct beneficiary of overheating elsewhere, hence if economics is a game where each one pursues their own self interest, then the Japanese have every interest in keeping this one running.
``There's been a lack of warnings from the monetary authorities on the yen's weakness,'' said Seiichiro Muta, director of foreign exchange at UBS AG in Tokyo. ``As interest rates have to be kept low, it can't be helped that the yen is somewhat weak. A weak yen also benefits exporters.''
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