> Rakesh Bhandari wrote:
>
> >I guess it follows from the Gowan framework (thanks for the review in the
> >last LBO, Doug) that a few more victories like this ('structural
> >reform' as the Anglo American financial press puts it)and the US may
> >finally help to engineer a devaluation of the yen?!
>
> Today's WSJ has an op-ed by Martin Feldstein arguing that the other
> G-7 countries not cooperate with Japan to suppress the yen's
> appreciation. His concluding paragraphs:
>
> <quote>
> Coordinated intervention would run counter to the interests of the
> U.S. and Europe. A weak yen would exacerbate the U.S. trade deficit
> and would jeopardize Europe's nascent recovery. Even more
> significantly, the expectation that the yen-dollar rate would rise at
> 8% a year would cause investors to borrow dollars and invest in yen
> until the interest differential just balances the 8% expected rate of
> yen appreciation. Since Japanese interest rates cannot fall further,
> the adjustment of the interest differential would have to occur by an
> increase of the dollar interest rates to at least 8% from today's 5%
> level.
>
> There is no reason why the G-7 countries should participate in an
> exercise in yen devaluation that would inevitably raise dollar and
> euro interest rates and weaken its trade balance. The key issue for
> the G-7 finance ministers is whether Japan should be free to pursue
> such a yen devaluation policy by itself or whether such a policy
> should be opposed on the grounds that it is an unacceptable
> interference with trade. If the ministers conclude that such
> exchange-rate intervention is unacceptable, the yen will continue to
> appreciate and the Japanese will have to seek to expand the economy
> through structural policies at home. In the long run, that may be for
> the best.
> </quote>
>
> In other words, to quote that great Watergate-era aphorism, let them
> twist slowly, slowly in the wind - until they do things our way.
>
>
But why does the the yen keep appreciating? The Ronald MacKinnon article from the Economist that I posted claimed it is due to "unresolved trade disputes" which struck me as being somewhat vague.
Anyone have any ideas?
Seth