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That's why it wasn't done until now. Things had to get so bad for so long that people would be willing to put up with short term pain for long term gain.

adventured 13y ago
Devaluing your currency to fake economic results is short term and long term pain. There is no longer term gain to be had from it. Currency devaluation doesn't make a nation wealthy. It doesn't make you more competitive. It doesn't create factories and jobs. It doesn't make your economy more productive. It doesn't spur innovation or business formation. It's a desperation move. Japan has to import almost everything that their factories need. So while the claim that their exports will be more competitive is true short term, their costs will skyrocket alongside that and the net gain will be zero at best. Meanwhile you punish savers and consumers. It's a bad Keynesian gimmick that won't save Japan. It's the last gasp of a dying experiment. Japan turned to destroying the Yen because they have nothing left to eat before they start consuming muscle. 50% of their tax collections already go to debt maintenance. They're effectively bankrupt. Their savings rate has plunged compared to where it used to be. The Yen is all they have left to abuse before they have to start slashing the public sector directly; inflation is just another means of doing that.
- w1ntermute 13y ago
  The big point that you're missing is that this is only the first step. No one is suggesting that currency devaluation by itself will solve the problem. The idea is to gain the legitimacy and political will in the short term, so as to enact fundamental structural reforms.
  - ekianjo 13y ago
    What political reforms? Abe is all about "stimulus" and further spending and diving into an ocean of debt. He was already prime minister a couple of years ago so we know very well what kind of policies he is supporting. He's just destroying the country further: inflation is punishing savers who will start buying foreign currency instead to protect their savings, or take it away from banks to do something else with it. This, in return, will reduce the amount of money that can be lended to the private sector and therefore will drive the economy down further, too. Consumption will be negatively impacted by raising prices, leading to further recession for everything produced and imported to Japan. I don't see how this is even a "short term gain" for anyone expect for the next 2 quarters of Toyota and such companies (because the costs of making stuff catch back to them).
    - w1ntermute 13y ago
      You haven't been following the news recently, have you? Here: http://www.economist.com/news/briefing/21578052-shinzo-abe-shaking-up-japans-economy-seems-different-man-one-whose-previous http://www.economist.com/news/briefing/21578052-shinzo-abe-s... Jump to the section "All change," if you're impatient.
      - ekianjo 13y ago
        So what? How is this going to change the outlook of the Economy in Japan, and why is there no word about the massive Debt problem in Japan ? And let's not forget : "Energy has its own particular urgency following the nuclear accident in March 2011 at Fukushima Dai-ichi plant, leading to the closure, if only for now, of nearly all Japan’s nuclear power stations. The government wants to encourage competition in supply and investment in renewable energy as well as in a national infrastructure for imports of natural gas." Import of natural gas + weak yen -> will not result in savings, oh no. This is going to cost more for everyone.
        w1ntermute 13y ago
        If you still do not understand after reading that article (and in 7 minutes flat, apparently), then I do not know what to tell you. It laid things out pretty clearly.
    - Aloisius 13y ago
      I'm not sure how this: inflation is punishing savers who will start buying foreign currency instead to protect their savings, or take it away from banks to do something else with it. leads you to believe this: This, in return, will reduce the amount of money that can be lended to the private sector and therefore will drive the economy down further, too. If savers were sticking all their money in government bonds and cash, what more could they possibly do to reduce the amount lended to the private sector? Their money is effectively gone from circulation already. Besides, the Japanese stock market is up 70% (!) in the last 6 months. In what universe if you're Japanese do you dump your money in foreign currency in an environment like that? Heck, I'm thinking of buying a few Japanese stocks, especially in export driven businesses.
- hudibras 13y ago
  "Currency devaluation doesn't make a nation wealthy. It doesn't make you more competitive. It doesn't create factories and jobs. It doesn't make your economy more productive. It doesn't spur innovation or business formation. It's a desperation move." Devaluing their currency will enable Japan's industries to sell more products, make them more competitive, and create factories and jobs. How exactly is this a desperation move? (Source: every economics textbook written in the last 75 years.) "50% of their tax collections already go to debt maintenance." Did you see the part about how almost all of Japan's debt is held internally? Those tax collections to service the debt are going right back into the pockets of Japan's bondholders, i.e. Japanese savings account holders and pensioners.
  - ekianjo 13y ago
    "Devaluing their currency will enable Japan's industries to sell more products, make them more competitive, and create factories and jobs. How exactly is this a desperation move?" You have not been reading his comment, apparently. Japan has like no natural resources, all its industries import raw materials from outside of Japan. These costs will significantly rise with a lower yen, therefore the product prices will catch up and they not be competitive anymore on the global market in a couple of months. It's a very short-term policy. Nothing good will come out it, and that policy just destroyed 30% of the saving of the whole Japan population, including private companies.
    - danmaz74 13y ago
      Disclaimer: I think that Japan has too high a debt. But saying "These costs will significantly rise with a lower yen, therefore the product prices will catch up and they not be competitive anymore on the global market in a couple of months" is mathematically wrong. Japan imports raw material, adds value with labor, and re-exports that material. The price of the raw material, if it doesn't change between importing and exporting it, is totally transparent. But with a lower yen you have actually lowered the cost of Japan's labor. So, yes, devaluing your currency makes your labor more competitive - you just made your workers less expensive. The downside? Your workers are less expensive - ie, poorer.

adventured 13y ago

Devaluing your currency to fake economic results is short term and long term pain. There is no longer term gain to be had from it. Currency devaluation doesn't make a nation wealthy. It doesn't make you more competitive. It doesn't create factories and jobs. It doesn't make your economy more productive. It doesn't spur innovation or business formation. It's a desperation move. Japan has to import almost everything that their factories need. So while the claim that their exports will be more competitive is true short term, their costs will skyrocket alongside that and the net gain will be zero at best. Meanwhile you punish savers and consumers. It's a bad Keynesian gimmick that won't save Japan. It's the last gasp of a dying experiment. Japan turned to destroying the Yen because they have nothing left to eat before they start consuming muscle. 50% of their tax collections already go to debt maintenance. They're effectively bankrupt. Their savings rate has plunged compared to where it used to be. The Yen is all they have left to abuse before they have to start slashing the public sector directly; inflation is just another means of doing that.

w1ntermute 13y ago
The big point that you're missing is that this is only the first step. No one is suggesting that currency devaluation by itself will solve the problem. The idea is to gain the legitimacy and political will in the short term, so as to enact fundamental structural reforms.
- ekianjo 13y ago
  What political reforms? Abe is all about "stimulus" and further spending and diving into an ocean of debt. He was already prime minister a couple of years ago so we know very well what kind of policies he is supporting. He's just destroying the country further: inflation is punishing savers who will start buying foreign currency instead to protect their savings, or take it away from banks to do something else with it. This, in return, will reduce the amount of money that can be lended to the private sector and therefore will drive the economy down further, too. Consumption will be negatively impacted by raising prices, leading to further recession for everything produced and imported to Japan. I don't see how this is even a "short term gain" for anyone expect for the next 2 quarters of Toyota and such companies (because the costs of making stuff catch back to them).
  - w1ntermute 13y ago
    You haven't been following the news recently, have you? Here: http://www.economist.com/news/briefing/21578052-shinzo-abe-shaking-up-japans-economy-seems-different-man-one-whose-previous http://www.economist.com/news/briefing/21578052-shinzo-abe-s... Jump to the section "All change," if you're impatient.
    - ekianjo 13y ago
      So what? How is this going to change the outlook of the Economy in Japan, and why is there no word about the massive Debt problem in Japan ? And let's not forget : "Energy has its own particular urgency following the nuclear accident in March 2011 at Fukushima Dai-ichi plant, leading to the closure, if only for now, of nearly all Japan’s nuclear power stations. The government wants to encourage competition in supply and investment in renewable energy as well as in a national infrastructure for imports of natural gas." Import of natural gas + weak yen -> will not result in savings, oh no. This is going to cost more for everyone.
      - w1ntermute 13y ago
        If you still do not understand after reading that article (and in 7 minutes flat, apparently), then I do not know what to tell you. It laid things out pretty clearly.
  - Aloisius 13y ago
    I'm not sure how this: inflation is punishing savers who will start buying foreign currency instead to protect their savings, or take it away from banks to do something else with it. leads you to believe this: This, in return, will reduce the amount of money that can be lended to the private sector and therefore will drive the economy down further, too. If savers were sticking all their money in government bonds and cash, what more could they possibly do to reduce the amount lended to the private sector? Their money is effectively gone from circulation already. Besides, the Japanese stock market is up 70% (!) in the last 6 months. In what universe if you're Japanese do you dump your money in foreign currency in an environment like that? Heck, I'm thinking of buying a few Japanese stocks, especially in export driven businesses.
hudibras 13y ago
"Currency devaluation doesn't make a nation wealthy. It doesn't make you more competitive. It doesn't create factories and jobs. It doesn't make your economy more productive. It doesn't spur innovation or business formation. It's a desperation move." Devaluing their currency will enable Japan's industries to sell more products, make them more competitive, and create factories and jobs. How exactly is this a desperation move? (Source: every economics textbook written in the last 75 years.) "50% of their tax collections already go to debt maintenance." Did you see the part about how almost all of Japan's debt is held internally? Those tax collections to service the debt are going right back into the pockets of Japan's bondholders, i.e. Japanese savings account holders and pensioners.
- ekianjo 13y ago
  "Devaluing their currency will enable Japan's industries to sell more products, make them more competitive, and create factories and jobs. How exactly is this a desperation move?" You have not been reading his comment, apparently. Japan has like no natural resources, all its industries import raw materials from outside of Japan. These costs will significantly rise with a lower yen, therefore the product prices will catch up and they not be competitive anymore on the global market in a couple of months. It's a very short-term policy. Nothing good will come out it, and that policy just destroyed 30% of the saving of the whole Japan population, including private companies.
  - danmaz74 13y ago
    Disclaimer: I think that Japan has too high a debt. But saying "These costs will significantly rise with a lower yen, therefore the product prices will catch up and they not be competitive anymore on the global market in a couple of months" is mathematically wrong. Japan imports raw material, adds value with labor, and re-exports that material. The price of the raw material, if it doesn't change between importing and exporting it, is totally transparent. But with a lower yen you have actually lowered the cost of Japan's labor. So, yes, devaluing your currency makes your labor more competitive - you just made your workers less expensive. The downside? Your workers are less expensive - ie, poorer.