Practical analysis for investment professionals
08 November 2012

Poll: Will the Bank of Japan Become More Aggressive in Weakening the Yen to Support Exports?

Posted In: Economics

A recent article by the Telegraph notes that the Japanese yen has risen sharply since the onset of the financial crisis in 2008: more than 30% versus the Chinese yuan, more than 65% versus the euro and more than 80% against the British pound. In a poll conducted earlier this week in the CFA Institute Financial NewsBrief, we asked professional investors whether they expect the Bank of Japan to become more aggressive in weakening the yen.

Do you expect the Bank of Japan to become more aggressive in weakening the yen to support exports?

 Poll Results: Will the Bank of Japan Become More Aggressive in Weakening the Yen to Support Exports?

For the first time in at least three decades, Japan is running a trade deficit with its foreign trading partners. Although the deterioration in net trade creates considerable risk for Japan, their current account balance continues to be a surplus because of continued income payments from their sizable overseas assets. Nevertheless, the current account balance, though still a surplus, is also deteriorating.

Since Japan’s asset price bubble began collapsing in 1989, Japan’s lost decades have been financed in large part through a strong current account surplus. As their current account weakens, it increases the pressure on the Bank of Japan to weaken the yen to stem the deterioration in exports. But a weaker yen also reduces the value of income payments, which will likely have a greater impact on the current account balance. This is Japan’s conundrum.

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

About the Author(s)
Ron Rimkus, CFA

Ron Rimkus, CFA, was Director of Economics & Alternative Assets at CFA Institute, where he wrote about economics, monetary policy, currencies, global macro, behavioral finance, fixed income and alternative investments, such as gold and bitcoin (among other things). Previously, he served as SVP and Director of Large-cap Equity Products for BB&T Asset Management, where he led a team of research analysts, 300 regional portfolio managers, client service specialists, and marketing staff. He also served as a Senior Vice President and Lead Portfolio Manager of large-cap equity products at Mesirow Financial. Rimkus earned a BA degree in economics from Brown University and his MBA from the Anderson School of Management at UCLA. Topical Expertise: Alternative Investments · Economics

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