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"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 mo

"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.

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.