Tokyo: Japanese policy makers moved fast for the demand to strengthen the yen, and highlighted the issue of currency stability in the face of global economic uncertainties. The point was emphatically made by the official that selling the U.S. Treasuries to push up the value of the yen will be another path and a lot of attention is being paid to such a policy suggestion.
Thus amidst these very huge concerns for the future economic stability of Japan, this statement illustrates the very bad issue of the exchange rate that the country is facing. Even though the yen has substantially weakened against the dollar over the last few years, it has brought about import costs and inflation scares. By advocating a stronger yen, such a policy maker wishes to begin easing some of these difficulties and begin to try to balance the economy of his motherland.
This statement is suggestive of the broader implications connected to Japan and its currency. It is where Japan normally intervenes in forex markets: to stabilize its own currency. This option can come to an end with the suggestion of staying away from selling U.S. Treasuries by the policy maker. If U.S. Treasuries are sold by Japan, it could ruin its friendship with the U.S., and that might well cause disruption within the global financial market, which Japan definitely does not want.
The weakening of the yen is an area of growing concern for both the government and businesses, given the high level of global inflation pressures. By opting for a stronger yen, the policymaker is championing a gain for long-lasting means to secure Japan's financial status without resorting to aggressive interventions in the market.
A strong yen could reduce the costs of imports, moderate inflation, and enhance the buying power of Japanese consumers, providing a major resuscitation to the economy."
[Source Credit: Reuters]
