For decades during a time of rapid economic growth and a debt deflationary period since 1990, the yen has steadily appreciated in value from the 360 JPY to the USD in 1949 to as high as 76.72 JPY to the USD recently in October 2011. Are we now at a major cyclical turning point for the yen?
BankINTRO.com thinks so. We think the yen will now enter a multi - year phase of modest depreciation. Not a crash, but a gradual slow period of declining currency valuations as the Japanese authorities try to nudge inflation to positive rates from modest deflationary measures. The good news is that the Japanese stock market may now turn into a bullish era as well from a devastating 20 year bear market.
Taxes remain on the whole quite low in Japan, they have room to move here to raise badly needed revenues to begin the process of bringing down the national gross debt which is out of control at over 200 percent of GDP. Not an entirely desperate situation as most of the debt is internally held by Japanese but a concern. Rating agencies have taken notice and put Japan on currency watch. These macro-economic challenges along with a declining population have the earmarks of modest yen currency decline in the years ahead. At present, the yen is approximately 35 percent overvalued to the USD as measured by purchasing power parity.
For more information on global currencies, please visit http://www.bankintroductions.com
Showing posts with label yen. Show all posts
Showing posts with label yen. Show all posts
Monday, March 26, 2012
Sunday, November 22, 2009
A US-dollar (USD) rebound around the corner?
The business media and pundits have all but declared the USD dead in the water. The question is, dead against what? When looking at currency valuations, a currency has to compared to another currency, usually in pairs.
Lets take a look at the USD and the Eurloand euro (EUR). In July 2008, it took 1.588 USD on average to buy one EUR. Today, it takes slightly less at 1.49 USD. The EUR itself may see significant short term headwinds in currency valuations as Greece, a signficant member within the Euro common currency zone is in serious economic difficulty. Greece's budget deficit is off the map, the economy is imploding and there is now talk of even Greece defaulting on its national debt. If Greece defaults, it will forced to leave the EUR and quite possibly return the drachma back to circulation within Greece as their new national currency. This currency event would be an economic earthquake in EUR trading valuations for several months. Accordingly, capital outflows out ot the Eurozone may see the USD benefit to a stronger exchange valuation. At present, the USD as measured by purchasing power parity is undervalued to the EUR by 20 percent, a valuation of 1.3 USD to 1 EUR is quite feasible by mid 2010.
The Japanese Yen has steadily increased in value to the USD since July 2008 from a valuation of 106 JPY to the USD to its current 89 JPY level. Much of the media talks about the US total debt ceiling approaching 90 to 100 percent of GDP depending on what figures you look at. But that is the general figure for the US debt at this time. Japan on the other hand has a national debt over twice as large as America's as measured as percentage of GDP. True, the majority of Japan's debt is held by domestic investors unlike the U.S., but Japan finds itself in a precarious position with other issues of significant concern. Their population is declining in numbers unlike the United States where the population base is growing. Japan's economy is not as diversified as America's. Further, Japan lacks the abundance of natural resources that America holds. With deflation still taking hold in Japan, it is a fair bet that the U.S. will likely see higher nominal interest rates down road before Japan. Don't be surprised to see an exchange valuation reversal in the near term with the USD breaking the 100 JPY level within 6 months. As measured by purchasing power parity, the USD is currently 25 percent undervalued to the Japanese yen.
Finally, lets look at gold. Gold is a great measure against all fiat currencies. Gold is due for a pullback currently holding at the 1150 USD per ounce level - a tremendous rally over the last year in USD gold valuation. However, it should be noted that gold like fiat currencies can trade illogical at times as well. Usually, gold and the USD trade inversely. When the USD falls, gold rises and vice versa. In the short term, it would not surprise us if we see both the USD and gold rising in value at the same time with gold approaching 1300 USD per ounce in 2010.
For updated currency opinions on the world's currencies, please visit BankIntroductions.com
Lets take a look at the USD and the Eurloand euro (EUR). In July 2008, it took 1.588 USD on average to buy one EUR. Today, it takes slightly less at 1.49 USD. The EUR itself may see significant short term headwinds in currency valuations as Greece, a signficant member within the Euro common currency zone is in serious economic difficulty. Greece's budget deficit is off the map, the economy is imploding and there is now talk of even Greece defaulting on its national debt. If Greece defaults, it will forced to leave the EUR and quite possibly return the drachma back to circulation within Greece as their new national currency. This currency event would be an economic earthquake in EUR trading valuations for several months. Accordingly, capital outflows out ot the Eurozone may see the USD benefit to a stronger exchange valuation. At present, the USD as measured by purchasing power parity is undervalued to the EUR by 20 percent, a valuation of 1.3 USD to 1 EUR is quite feasible by mid 2010.
The Japanese Yen has steadily increased in value to the USD since July 2008 from a valuation of 106 JPY to the USD to its current 89 JPY level. Much of the media talks about the US total debt ceiling approaching 90 to 100 percent of GDP depending on what figures you look at. But that is the general figure for the US debt at this time. Japan on the other hand has a national debt over twice as large as America's as measured as percentage of GDP. True, the majority of Japan's debt is held by domestic investors unlike the U.S., but Japan finds itself in a precarious position with other issues of significant concern. Their population is declining in numbers unlike the United States where the population base is growing. Japan's economy is not as diversified as America's. Further, Japan lacks the abundance of natural resources that America holds. With deflation still taking hold in Japan, it is a fair bet that the U.S. will likely see higher nominal interest rates down road before Japan. Don't be surprised to see an exchange valuation reversal in the near term with the USD breaking the 100 JPY level within 6 months. As measured by purchasing power parity, the USD is currently 25 percent undervalued to the Japanese yen.
Finally, lets look at gold. Gold is a great measure against all fiat currencies. Gold is due for a pullback currently holding at the 1150 USD per ounce level - a tremendous rally over the last year in USD gold valuation. However, it should be noted that gold like fiat currencies can trade illogical at times as well. Usually, gold and the USD trade inversely. When the USD falls, gold rises and vice versa. In the short term, it would not surprise us if we see both the USD and gold rising in value at the same time with gold approaching 1300 USD per ounce in 2010.
For updated currency opinions on the world's currencies, please visit BankIntroductions.com
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