Play the Exchange Rate Game [with Yen]

RisingSunofNihon ^ | June 12, 2006 | Dr. Bill Belew

[G. Stolyarov II]

All Headline News reported that Japanese exporters are trying to take advantage of the rise in the Yen rate.

When the dollar spikes, they try to sell it in order to save up for later purchases in the year.

The current yen rate hovers around 114 yen = $1.

I remember when it was 260 yen = $1. Some of my missionary friends tell me of a time when it was 350 = $1.

When Japan started to produce quality products for very affordable prices, everyone started crying 'foul' and 'undervalued,' and then trade imbalances started growing.

In the end, the yen was revalued and once grew to 79 yen = $1-- AND-- the trade imbalance didn't change. We just paid more for products in Japan. The Japanese didn't get any richer - because their products were sold for the same amount of yen. We just paid more.

Somebody tell me how revaluing the yuan in China and he ruble in Russia is going to solve the trade imbalance.

America needs to make better products and sell them for more affordable prices. That will solve the imbalance.

What do you think?

[G. Stolyarov II]

"America needs to make better products and sell them for more affordable prices. That will solve the imbalance." That sentiment is right on target; Japanese companies are offering American consumers products they want and need. It is time for American companies to start offering products that Japanese and other foreign consumers want and need: products as fitting to the needs of the Japanese consumer as Japanese products are fitting to the needs of the American consumer. The United States is a land of ideas; surely American entrepreneurs would be able to think of something to sell overseas-- provided that silly government protectionist measures do not destroy their incentives to be efficient and innovative. See Dr. Belew’s blog at RisingSunofNihon

[the invisib1e hand]

I think you can only run with zero or negative interest rates for so long before you have to raise rates.