Number of FT articles containing “yen” (source: Merrill Lynch) |
Similarly, Google search frequency for "JPY" rose recently as well.
Google Trends for "JPY" |
Public's attention has therefore turned to the G20 meeting this week, where some have hoped Japan would be asked to moderate its policy. The Eurozone is particularly concerned that the relative strength of the euro will delay its exit from the economic malaise. Germany for example is in direct competition with Japan in auto sales, and a relatively small change in the EUR/JPY levels could result in major differences in sales and profit margins.
But with the world watching and the Germans hoping for action against Japan, the US quickly stepped in to support Japan's policy. After all the US has been following a similar policy itself. This NY Times article described the situation quite well:
NY Times: - Ben S. Bernanke, the Federal Reserve chairman, strongly indicated on Friday that the United States did not intend to censure Japan for weakening its currency over the last several months, something that has aided Japanese exporters and angered its competitors.
Mr. Bernanke spoke in brief introductory remarks at a conference in Moscow of the Group of 20, a club of the world’s largest industrial and emerging economies.
At issue are stimulus programs backed by Prime Minister Shinzo Abe, who is also maintaining pressure on the Bank of Japan to keep interest rates near zero and flood the economy with money to support Japanese manufacturers. As a result, the yen has lost about 15 percent of its value against the dollar over the last three months, meaning products made in Japan, like some Sony electronics or models of Toyota cars, are relatively cheaper.
Japan’s maneuver touched off fears that other countries and the European Union might follow suit in a so-called currency war, which has been the main topic of the Group of 20 meeting here, which runs through Saturday.
Initially, it seemed the world’s largest economies might agree on a firm statement at the end of the meeting to condemn a currency war, or competitive devaluations. This tactic is now widely seen as a beggar-thy-neighbor approach to creating growth that would ultimately harm a global recovery and is understood to be a cause of the lingering nature of the depression in the 1930s.