• Tokyo


the Sept. 19 editorial “Long battle in currency markets“: For at least 20 years we have heard the argument from Japan’s government and media that Japan must be allowed to intervene in currency markets to cheapen the yen vis-a-vis other major currencies, such as the dollar and euro. The Japanese economy depends on export-led growth, so Japan’s trading partners should allow Japan to artificially make Japanese exports more competitive in world markets.

The only thing missing here is reasoning. The European Union, United States, Canada and Japan are all rich, developed economies, and Japan has been fully developed since at least the 1980s. Why, then, is the rest of the developed world supposed to continuously tolerate trade deficits with Japan based on an artificially cheap yen?

In their commentary, Japanese economists tend to blame a strong yen on weakness in the EU and U.S. economies while ignoring the fact that Japan has been running large trade surpluses with its trading partners for decades.

A strong yen simply reflects the fact that Japan is a very rich, developed country that has massively benefited from the terms of trade since the late 1940s. Over the decades, entire industries in both the U.S. and Europe were virtually wiped out due to the fact that they simply could not compete on price with artificially cheapened Japanese imports. The flip side of Japanese currency intervention — which protects Japanese manufacturing jobs — is the loss of millions of jobs in the economies of Japan’s trading partners. Is beggar-thy-neighbor currency intervention truly the best policy for a rich country?

The way forward may be to ask simple questions such as: Should a fully developed country still need to depend solely on its export sector for stable growth?

jonathan williams

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