Japan: Controlling the Yen

The prolonged economic slump in the Land of the Rising Sun continues to worry many observers. One of the few bright spots have been Japan’s continued strong exports. But these are threatened by a falling dollar and rising yen. Our Read My Lips feature takes a closer look at Japan’s currency — and its impact on global trade and politics.

What dilemma does the yen’s value present?

“Asia’s dilemma is this: If the yen goes up, you bankrupt Japan. If the yen goes down, you bankrupt Asia.”

(Alexander Kinmont, Morgan Stanley, March 1998)

Is Japan actively pushing down the yen?

“Our concern is that unless there’s a clear signal from the U.S. Treasury that they don’t want Japan intervening to push the yen down further, they’ll continue to do so.”

(Mustafa Mohatarem, Chief Economist of Goldman Sachs, January 2002)

How is this matter seen at Japan’s highest political level?

“We have no intention whatsoever of consciously bringing the yen lower.”

(Japan’s Prime Minister Junichiro Koizumi, July 2001)

Why would Japan want a weak yen?

“The export business supported by the weak yen is one of the very few options that Japan now has to change the economic situation.”

(Teruhisna Tokunaka, CFO of Sony, April 2002)

Who in Japan would benefit from a strong yen?

“For our people’s living standards, a strong currency is a good thing. During the Golden Week holiday, many young girls can enjoy going overseas to go shopping.”

(High-ranking Japanese finance ministry official, May 1995)

Why are U.S.-Japanese trade relations often fraught with tensions?

“Because we buy too much from Japan — and we sell it too little. Everything else is commentary.”

(New York Times columnist Thomas L. Friedman, March 1995)

What control do the Japanese have over their currency?

“We cannot move the market by ourselves.”

(Former Japanese Prime Minister Ryutaro Hashimoto, June 1998)

But surely someone is in charge?

“Everyone is responsible. But no one wants to take responsibility.”

(Merrill Lynch Asia economist, April 1995)

What is the danger for Japan?

“We are going to face a very, very hard landing.”

(Japanese central bank official, January 1999)

Are the Japanese confident of solving the problem?

“We are at wits’ end — at the moment of final reckoning.”

(Japanese central bank official, January 1998)

What role should the other large economies play?

“If there should be any steps taken to stem the decline of the yen, there should be some market intervention — and Japan can’t do it alone.”

(Toshiro Suzuki, Economics Counselor at the Japanese Embassy, June 1998)

Does the introduction of the euro have any effects on Japan’s currency?

“As far as Japan is concerned, we do not have any intention of shifting our portfolio in foreign reserves.”

(Former Japanese Vice Minister of Finance, Eisuke Sakakibara, January 1999)

Is Japan willing to heed the advice from abroad?

“There’s a joke in Japan about how to sustain the yen. Let’s import Alan Greenspan — and Bob Rubin.”

(Remark by a journalist at a Washington, D.C. press conference)

And finally, what does the Bush Administration think of Japan’s exchange rate policy?

“Exchange rates can’t improve productivity — or fix non-performing loans.”

(U.S. Treasury Secretary Paul O’Neill, January 2002)