Japan Returns to Weaker Yen Policy

(Repost from January 7, 2010)

Naoto Kan, Japan’s new Finance Minister, took office today and promptly requested that currency traders sell the yen. This stance further supports September’s backtracking from an implicit stronger yen policy earlier suggested by out-going Finance Minister, Hirohisa Fujii. Japan has now officially returned to the de facto competitive devaluation that underlies the currency stance of most countries during the global economic recovery. Kan went so far as to give markets a specific target:

“Kan said many Japanese companies are in favor of the dollar trading around 95.00 yen, and that he will work with the Bank of Japan to get the currency to ‘appropriate’ levels. The dollar spiked to 92.63 yen, from 92.15 yen before Kan spoke.”

Kan’s reference to the interests of Japanese companies confirms my earlier claim that exporters and pro-mercantile forces would succeed in applying the necessary pressure to align Japan’s government behind a weaker yen.

Be careful out there!

Disclosure: long USD/JPY

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