Magazine article Modern Trader

Debt Pressures Yen. (Hot Commodities)

Magazine article Modern Trader

Debt Pressures Yen. (Hot Commodities)

Article excerpt

The Japanese yen managed to rally above 0.8700 in July from lows below 0.7500 early in the year when the Dow Jones Industrial Average hit the skids this summer. In what could be a sign of a deteriorating condition in Japan, however, the yen couldn't muster much of a rally when the Dow took out those lows this fall.

A mountain of bad debt and a stock market in the throes of a 19-year bear market are weighing heavily on the currency, as is the government's tendency to step in and pressure their currency when a stronger yen may threaten exports, which is the only part of the Japanese economy that is working, according to Alaron currency analyst Bob Kozak.

"Every time the yen gets bid up, the government intervenes. A higher yen is not good for exports and that is the only game in town right now," Kozak says.

On the flip side, though, is a weak yen could lead to more bankruptcies.

"If the yen goes down and [their stock market] further erodes, [Japanese investors] may go into other assets like gold," Kozak adds. …

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