Japan Prime Minister Naoto Kan says he is ready to take “bold” action as the yen approaches its all-time high against the dollar set. Traders say new records are inevitable even after this year’s 9.2 percent gain.
Japan’s currency needs to rise 47 percent to equal its strength in the mid-1990s based on the Westpac Real Effective Exchange Rate Trade Weighted yen index, which accounts for an inflation rate that’s been mostly negative since 1998. Deutsche Bank AG, the world’s biggest foreign-exchange trader, estimates on that same basis the yen would have to gain to 55 per dollar from 85.22 last week to match the record 79.75 in April 1995.
“In real terms, the yen is not really that strong compared to 1995,” said Eisuke Sakakibara, known as “Mr. Yen” for his efforts to influence exchange rates when he was Finance Minister from 1997-1999. “In 1995 we were in crisis. Now, given the fact that the U.S. recovery is faltering and the Japanese economy is doing relatively better, I think this situation is not what you call a crisis situation.”
Unlike 15 years ago, Japan is less reliant on the U.S. for trade. Asia, which has some of the world’s fastest growing economies, accounted for more than 50 percent of Japanese exports last year for the first time, while U.S.-bound shipments made up 16 percent, about half the level from a decade earlier, Ministry of Finance data show. LINK
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