Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Closing Report: Gold and Silver End Slightly Lower
By: Chris Mullen, Gold Seeker Report

Are You Ready For The Next Rally?
By: Craig Hemke

Long Term Patterns in Stocks, Gold and Crude
By: Gary Christenson

Exploration Update: Golden Arrow’s Pescado Project
By: Nicholas LePan, SilverSeek.com

GoldSeek Radio Nugget: Charles Hughes Smith and Chris Waltzek
By: radio.GoldSeek.com

Strap Yourself In - We Are About To See Some Big Moves In Metals
By: Avi Gilburt

Visit the Top Blockchain and Cryptocurrency Power Hubs of the World
By: Frank Holmes

Gold’s Upside Target
By: Przemyslaw Radomski, CFA

Dollar Crisis
By: Gary Savage

What Gold Needs to Do Now
By: Rick Ackerman

 
Search

GoldSeek Web

 
Japan and US at G7 – Agree to Disagree

By: Dan Norcini

 -- Published: Sunday, 22 May 2016 | Print  | Disqus 

The big Pow-Pow taking place in Japan with the G7 ( Group of Seven) finance ministers yielded what most of us already expected – no agreement whatsoever.

I found Japanese Finance Minister Taro Aso’s remarks quite revealing. His view is that the recent movements in the Yen have been “excessive”. “The movement seen over the past several weeks can’t be described as ‘orderly,” he noted.

He noted that “one-sided, speculative trades” have been behind some of the move higher in the Yen. The Japanese find such things undesirable.

In their view, intervention can therefore be justified.

He further added that Japan prefers to see changes in the Yen of a gradual nature.

The US side, led by Treasury Secretary Jack Lew, believes that the movement in the Yen have been orderly.

I can see no way out of this impasse as they are not even close to agreeing!

What the US side apparently does not grasp, and which we have mentioned repeatedly here at this site, is that a weaker Yen is the lynch pin in the entire Prime Minister Abe economic recovery plan. Abe campaigned on this issue and MUST PERFORM if he is to stay in office. Take away a weak Yen and the entirety of his strategy for revitalizing Japan’s economy comes crumbling down. What do you think will happen to his party ( Liberal Democratic Party) at the voting booth if he fails? He knows that, Finance Minister Aso knows that and most everyone in the Abe administration knows that. Apparently the US delegation does not.

Take a look at the following intermediate term chart of the Yen.

Chart_16-05-21_11-09-19

The Yen had erased the entirety of its 2015 decline by the last week of April this year. The currency has drifted lower in May but still remains elevated after basically reaching its former floor in 2014.

Abe was elected Prime Minister by the Japanese legislature in late December 2012 as his party, along with their coalition partner, held a wide majority. You can see what happened to the Yen immediately after his taking of office; it plummeted sharply in the first half of 2013.

My guess is that if the Japanese were to try intervention, knowing how risky it is because of the current view of the US that it is not warranted, they will probably wait until it pushed closer to the top of the congestion zone formed in the first half of 2014. That would be up to near the level of the “penny yen”. Their economy did pretty well in 2013 and the first half of 2014, so they can probably tolerate the Yen up near the “penny” level, but anything beyond that would be unacceptable to them.

If the Abe administration/Liberal Democratic Party has to pick between staying in office or angering the Americans, it will choose the former and deal with any backlash later. There is an old saying in life in general, “It is better to ask forgiveness than to ask for permission”. That would be the path they would undoubtedly choose if the Yen were to continue to strengthen.

Fortunately for them, the Fed sounded that hawkish note in their FOMC minutes which took some of the wind out of the Yen as the Dollar began moving up.

You can see the predicament these Central Bankers have gotten themselves into. If the Fed turns dovish, the Dollar drops and the Yen rallies. That in turn brings added political pressure on the Abe administration to intervene, especially if the profits of major Japanese corporations such as Honda, Toyota, etc, begin to suffer as a result of lost business due to Yen strength.

The flip side is that the US benefits because commodity prices move higher and inflation picks up ( at least at the wholesale level when it comes to commodity prices ) staving off the Fed’s dreaded DEFLATION enemy.

If the Fed turns too hawkish however, Japan’s problem is solved as their Yen starts dropping but as the US Dollar in turn moves higher, commodity prices start moving lower and with that, the short-circuiting of the Fed’s efforts to gin up inflation here in the US.

All of these Central Bankers are trying to accomplish the same thing at the same time – namely, get out of the deflation trap and generate an inflation rate of 2% – but in order to achieve it, they all need a weaker currency which works to push up prices domestically. The problem is that someone’s weaker currency is someone else’s stronger currency. Inflation in one zone leads to deflationary pressures in the other.

What a nightmare. I sure wish the alarm clock would ring and we would see this bad dream come to an end but sadly I don’t hear any bells going off at the moment.

https://traderdan.com/


| Digg This Article
 -- Published: Sunday, 22 May 2016 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2017



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.