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jasonbvr (Offline)
Posts: 771
Join Date: Dec 2006
Location: Japan
01-30-2007, 02:01 AM

Originally Posted by popeyethehomeswinger View Post
I re-evaluated it into swedish currency, and 150 000 yen aint much =P
it's easy to get fooled by the high numbers. I i cant understand how the worlds second richest country can have such a poor currency, whats the reason ?
Let me sum it up as quick as I can for you. Japan's economy basically had a blow out a few years back because of rapid deflation. From what I understand, the economy relied too heavily on exports and didn't have a lot of imports coming in or something. For the past ten years Japan has been in recovery mode which means setting the lending rate low (currently .25 percent which is up from 0!) to spur investment.

Why is it so low right now? The Bank of Japan and the government does not think the economy is recovering as fast as previously thought. One reason, Japanese do not spend a lot of money say like Americans. Another reason it is low is because they are fairly uncertain about their economic future so all other countries reflect this by having the same outlook. They have a low birth rate with high numbers of retirees so everyone looks at this and thinks who is going to do the work to pay for the social security/pension system. All this worry about the economy has a cyclical effect in that Japanese are worried about their future economy and therefore don't marry and have kids because they are worried about their kids economic future and on top of that are still saving a lot of money because they are worried about retirement when they get old.

The overall theme behind this whole story is that the economy is a mess, everyone is confused and worried and kind of stuck at a crossroads of sorts wondering which way to go. The result is overseas investors look at Japan and say one month, "Oh I think they're coming back strong." The yen rises. Then a few months later Japan starts going, "The birth rate is too low, there isn't enough consumer spending, the rates have to remain low because we are not recovering strong enough." Then the yen plummets. Which is where we are now.

About half way through the year it will probably strengthen if we get good news from the BOJ.

Last edited by jasonbvr : 01-30-2007 at 02:04 AM.
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