In its Policy Board meeting from Jan. 17 to 18, the Bank of Japan kept the key short-term interest rate unchanged at 0.25 percent on the grounds that prices and consumer spending were still weak. The decision triggered a yen selloff in the currency markets, pushing the yen down to around 122 against the dollar -- the lowest since March 2003.

However, it's not that foreign currencies are rising against the, yen but that the yen's value is declining. Not just against the major currencies, but against the won and yuan as well. Since the end of January 2006, the yen has declined 3.8 percent against the dollar, 10.6 percent against the euro, 7.2 percent against the yuan, and by more than 20 percent against the won.

While a weaker yen helps Japanese exporters, we must also recognize that it brings major disadvantages.