Japanese yen's plunge vs. the dollar makes its exports cheaper and its companies more competitive. G7 finance ministers will focus on the Japanese yen at talks in the UK this weekend.
By Martin Benedyk and Pan Pylas
Financial leaders from the world's top seven developed economies are gathering in the U.K. to discuss how to shore up the global recovery just as the stimulus measures of one its members,Japan, has caused its currency to take a dramatic slide.
Supporting the global economy and the role of central banks are set to be the key points of this weekend's discussions among financial ministers and officials from the Group of Seven countries — the U.S., Germany, Japan, the U.K, Italy, France and Canada. But attention will also turn the financial markets, which on Friday were dominated by developments surrounding the yen and the Bank of Japan's super-aggressive monetary policy.
The dollar breached the 100 yen mark late Thursday — the first time in a little over four years. Over the past few months, the yen has dropped sharply as the new government in Japan tries to bring an end to the country's two-decade stagnation.
Japan's central bank has been pumping money into the economy in the hope of stoking inflation — the country has suffered from falling prices for much of the past 20 years, which has hit company profits and halted growth. One consequence of the new inflationary approach has been the sharp fall in the value of the yen against other countries' currencies.
So far there's been a certain amount of support for Japan's economic gamble — even though the yen's decline makes the exports of other countries more expensive.
That's led many in the markets to conclude that the Japanese monetary authorities are actually targeting the exchange rate, a charge officials in the country have consistently denied.
Nevertheless, talk of a currency war — where countries use their exchange rates as an economic weapon — has not died down. If other countries respond to the falling yen by debasing their currencies, Japan will be back at square one and the world economy could suffer.
By Martin Benedyk and Pan Pylas
Financial leaders from the world's top seven developed economies are gathering in the U.K. to discuss how to shore up the global recovery just as the stimulus measures of one its members,Japan, has caused its currency to take a dramatic slide.
Supporting the global economy and the role of central banks are set to be the key points of this weekend's discussions among financial ministers and officials from the Group of Seven countries — the U.S., Germany, Japan, the U.K, Italy, France and Canada. But attention will also turn the financial markets, which on Friday were dominated by developments surrounding the yen and the Bank of Japan's super-aggressive monetary policy.
The dollar breached the 100 yen mark late Thursday — the first time in a little over four years. Over the past few months, the yen has dropped sharply as the new government in Japan tries to bring an end to the country's two-decade stagnation.
Japan's central bank has been pumping money into the economy in the hope of stoking inflation — the country has suffered from falling prices for much of the past 20 years, which has hit company profits and halted growth. One consequence of the new inflationary approach has been the sharp fall in the value of the yen against other countries' currencies.
So far there's been a certain amount of support for Japan's economic gamble — even though the yen's decline makes the exports of other countries more expensive.
That's led many in the markets to conclude that the Japanese monetary authorities are actually targeting the exchange rate, a charge officials in the country have consistently denied.
Nevertheless, talk of a currency war — where countries use their exchange rates as an economic weapon — has not died down. If other countries respond to the falling yen by debasing their currencies, Japan will be back at square one and the world economy could suffer.
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