This one has been pointed out on these pages already today, but I thought I’d add my two cents…
Exploding Japanese government debt levels have traditionally not weakened the JPY because Japan’s large current account surplus allowed Japan to self-fund its debt. Slumping exports and rising government spending are absorbing that surplus, casting doubt over Japan’s ability to fund its deficit going forward. A rapidly aging population compounds the problem as pensioners spend their savings, reducing the pool from which the government traditionally funded fiscal deficits.
While the new DPJ-led government has argued a strong JPY is good for the economy, it won’t be long before they go the way of the SNB, and actively try and weaken the JPY against the dollar and CNY. It is difficult to see how Japan survives, financially, with a strong JPY.
Offers lie up in the 90.25/30 window near-term, traders report. USD/JPY trades now at 90.10.
