Posted tagged ‘the Japanese yen’

Japan Shrinks

May 20, 2009

Japan’s headache shows no signs yet of subsiding.  First quarterly results show that the economy there has shrunk at its fastest pace since 1955.

Exports, consumer spending, company output are all down.  The GDP has shrunk more than expected and by a far greater percentage that other regions – such as the Eurozone and the USA.  Japan shrunk by 15.2 per cent, Eurozone by 2.5 and USA by just 1.6 per cent.  Stark contrasts.

The Prime Minister of Japan, who oft faces strong criticism from opposition parties and from the general public, has said the country needs to take fast action to try and recover the economy.  He plans further fiscal stimulus, and large companies such as Toyota have begun more job cuts and lowering of production levels.

Unsurprisingly, this news will already have affected the foreign exchange market – the biggest liquid global market  -as the confidence levels in Japan decrease.  More will need to be done to lure investors back there.


Revised Outlook for EU

May 5, 2009

A new week, a new stance on our continent’s economic status.  Last week, one was beginning to feel positively rosy with all the news of increased profits and slowdown in declines….

But we wouldn’t want to get too excited would we?  Because we really ought to know by now that all in all, there just isn’t that much to get excited about on the economy.  Yes, there is the odd bit of good news here and there, and currency trends change sometimes for the better for certain currencies – recently the Norwegian krone has been enjoying a reliable status – but overall the best thing to do, it seems, is to just stay cynical.

The European Commission has now re-thought its last forecast for Europe, and now things are even worse!  There will be declines all around, and Germany’s decline is set to be the largest at 5.5 per cent.  The UK will see around 4 per cent, which is more than Chancellor Darling’s prediction.

The European Central Bank is also set to introduce measures to boost the EU economy.  There is even speculation that they will introduce quantitative easing, something which the Bank of England introduced amid much negative reaction.  They are also set to reduce the interest rate to 1 per cent.  This and other speculation in the foreign exchange market over what they are set to do has caused the euro to fall against 13 of the 16 most-traded currencies, including the US dollar and the yen.

The Future for the Yen in 2009

January 28, 2009

The author is on a bit of a roll these days with concentrating on world currencies.  It is an interesting time for currencies though.  To compare exchange rates may not be everyone’s cup of tea but it is interesting if you look at some of the basics.  So far we have concentrated on the pound, the euro and the US dollar so now let’s have a quick look at the Japanese yen.

This currency has had a pretty strong year compared to others – 13 year highs against the US dollar and a rise by over 35% against the sterling – but as we have seen with the Euro, this isn’t necessarily a good thing.  Japan relies heavily on export, and obviously people are less likely to want to buy from the Japanese if their currency is so much stronger than theirs.  Toyota, the world’s biggest car maker, reported its first losses in 70 years.

The Bank of Japan has also been aggressive in its rate cutting and even reached 0.1%, just shy of zero.  So until they calm down and the market as a whole gets less volatile, things will remain difficult for the yen.  Sure, Japan could ask for assistance from its peers in order to try and weaken their currency, but the US and Europe are very unlikely to want to make their currencies stronger (especially Europe who are already in a situation very similar to Japan).  So perhaps it will be something of a waiting game until things steady themselves out before people gain confidence.