In recent days, Dollar/Yen has broken down to a new low (Yen to a new high) and this is an obvious concern for Japan, which has been mired in deflation and can’t get out. Moreover, 12% of Japan’s economy is exports. The strong Yen is hurting exports and the exporting companies of course.
Dow Jones is reporting that on Monday, the Prime Minister and BOJ Governor met to discuss the possibility of quantitative easing.
In a Bloomberg report there was some typical some jaw-boning from the BOJ Governor:
“The bank is always prepared to act promptly and decisively if judged necessary to ensure the stability of financial markets,” Shirakawa said at a business meeting in Nagoya, central Japan today. “The bank will do its utmost to overcome deflation both in terms of monetary easing and ensuring the stability of the financial markets.”
Clearly the coming currency wars are already here. China’s currency policy is hurting the exports of US and Asia in addition to Japan. Meanwhile, the UK is in quantitative easing. Soon the only one left could be the European Union, where the member countries disagree on policy. Certainly, QE in Japan and Europe can give a boost to the greenback, but ultimately this is not bearish for Gold, which would see more demand in terms of the Euro and Yen. Gold/Yen is testing its 2008 high and this news could be a catalyst for a breakout.