The ferocious waves of Yen devaluation swept through Asia, the domino effect caused the currency crisis stricken countries saw their currency value plummeted precipitately; dollar best value was around 1.46 Yen. Some pessimistic analysts predicted the Yen would easily cross the threshold of 150. However, I read another news said that the true worth of Yen was around a dollar to 95 Yen.
Whether the results were derived from the crude purchasing power parity theory or sophisticated modelling techniques. The volatility of currency value created havoc in the world currency market. Hopefully Behavioural Finance will be able better explain the phenomenon.Yen kept plunging albeit BoJ 's intervention. Panicky countries abjectly urged G7's to coordinate their efforts to prop up Yen's value.
The question is: Is central bank intervention an effective measure to resolve sagging Yen's problem? Yes, it can be a short term measure, but not an effective long term solution.Japan suffered from deflation since early 90s due to asset bubble in the late 80s. The economic problem entangled in political problem exacerbated the economic slowdown.Despite change hand frequently at the helm , none of the political parties have taken bold measures to pep up the economy.
The recent statistics showed Japan economy was already in recession.Japan's economic problems have some similarities compared to that of Asian countries, such as sagging market confidence, increasing unemployment, collapsing asset prices and weak banking systems and mountainous debts at private sector. The differences are Japan has huge foreign currency reserves (current account surplus), large enough to ward off currency speculators and absorb bad debts at banking sector. That gives Japan an option whether to invite capital inflows as compare to cash crunch in Asian countries.
After all, national sovereignty is still prevail in Asian countries, they grudged surrendering their economies to the foreign investors and perceived it as a plot. Japan has probably the lowest interest rate in the world. Its official discount rate is about 0.5%, government bond is about 1.2%. The low interest rate and weak capital market resulted capital outflows making Yen deteriorate than ever. Ageing population and falling prices paint a gloomy picture for corporate growth.
Some Chicago elites urged to increase interest rate. MIT professor Paul Krugman advocated to keep printing money to increase inflation rate and drive real interest rate to negative level, thereby creating new incentivesfor firm to invest. Milton Friedman also for the idea of increase of money supplies. Although they offered incongruous views, they are eminent economists and their advocacy are based on monetary theory. Although I aware that it is generally economist's domain,I wish to view the problem from a different light using common sense.
I reverse-engineered the situation, differentiated cause and effect, and suggest a redistribution of wealth proposition. The main purpose is to counter deflation psychology. This may be applicable to contracting economy. I see the economy encompasses three players; i.e., government, business sector and people, each playing different functions. Government is facilitator and leader,coordinate the growth of the economy and providing the necessary infrastructure for the growth of the economy. The actual growth engine is business sector. People constitute internal consumption of resources. As economy begins to contract, business sector and people scrimp and cut back demand and consumption forecast, it further shrinks economy and this downward spiral start to snowball. The crux is to arrest the situation before it become worse.
Unemployment and reduction in disposable income are the sources of expectation cut back. Dampening demand and growing losses further reduce corporate demand, retrenchment, freeze or cut wages. The economy is shrinking, the business sector and people are getting smaller and smaller in the pie distribution. It does not help to revive the economy. To counter the situation, government should take a lead to redistribute wealth,cut tax, not only corporate tax, because there will be no cash flow impact if company incurred losses, also other related business taxes and levies that effectively transfer wealth from government to private sector.
When economic performance improve, government is clever to impose and revert tax to original position. By doing so, private sector is able to pay better wages to people and use the "extra" resources for growth increasing the multiplying effects. Although government can increase expenditure in infrastructure, that only benefits certain sectors. And these infrastructure expenditure must result in increase productivity (i.e., increase economy output). Redistribution of wealth to private sector increase the velocity of money flows through multiplying effect faster than the public sector. Original demand cut back and retrenchment are inevitable.
As the bottom line turns blue and company has more cash reserves, confidence in private and people restore and will further fuel demand growth. Therefore, government and private sector must be willing to share the pie--redistribution of wealth. Government as leader must be pro-business, take the lead to open new market to create demand, reduce unemployment; for example, revive tourism sector, this will help in airline, travel, Hotel, consumer sectors. Weaken regional currencies certainly an attraction to the west to visit Japan and the region. A deliberate and coordinated plan of regional package tour will certainly help Japan and regional countries. Revived tourist sector will create more jobs and bring in foreign reserves.
Government role is to facilitate growth and explore new opportunities (domestic and export).Of course, Japan has the uphill task to shake up its banking sector. This requires courageous and determination to break up with the old system. I used to admire some of the Japanese systems such as Quality management, Kaizen, Just in time (Probably now scrapped due to traffic congestion),Toyota production system, TPM, Target costing, empowerment and knowledge management. Many of the leading edge companies in the west adopted Japanese companies' best practices. Japanese is also innovative to convert invention to creative products. I hope team spirit will help Japan sail through economic crisis. A strong and stable Yen not only help Asian economy. It is also an emblem of strong Japan economy.
The ferocious waves of Yen devaluation swept through Asia, the domino effect caused the currency crisis stricken countries saw their currency value plummeted precipitately, dollar best value was around 1.46 Yen. Some pessimistic analysts predicted the Yen would easily cross the threshold of 150. However, I read another news said that the true worth of Yen was around a dollar to 95 Yen. Whether the results were derived from the crude purchasing power parity theory or sophisticated modelling techniques.
The volatility of currency value created havoc in the world currency market. Hopefully Behavioural Finance will be able better explain the phenomenon.Yen kept plunging albeit BoJ 's intervention. Panicky countries abjectly urged G7's to coordinate their efforts to prop up Yen's value. The question is: Is central bank intervention an effective measure to resolve sagging Yen's problem? Yes, it can be a short term measure, but not an effective long term solution.Japan suffered from deflation since early 90s due to asset bubble in the late 80s. The economic problem entangled in political problem exacerbated the economic slowdown.Despite change hand frequently at the helm , none of the political parties have taken bold measures to pep up the economy.
The recent statistics showed Japan economy was already in recession.Japan's economic problems have some similarities compared to that of Asian countries, such as sagging market confidence, increasing unemployment, collapsing asset prices and weak banking systems and mountainous debts at private sector. The differences are Japan has huge foreign currency reserves (current account surplus), large enough to ward off currency speculators and absorb bad debts at banking sector. That gives Japan an option whether to invite capital inflows as compare to cash crunch in Asian countries. After all, national sovereignty is still prevail in Asian countries, they grudged surrendering their economies to the foreign investors and perceived it as a plot.
Japan has probably the lowest interest rate in the world. Its official discount rate is about 0.5%, government bond is about 1.2%. The low interest rate and weak capital market resulted capital outflows making Yen deteriorate than ever. Ageing population and falling prices paint a gloomy picture for corporate growth.Some Chicago elites urged to increase interest rate. MIT professor Paul Krugman advocated to keep printing money to increase inflation rate and drive real interest rate to negative level, thereby creating new incentivesfor firm to invest. Milton Friedman also for the idea of increase of money supplies. Although they offered incongruous views, they are eminent economists and their advocacy are based on monetary theory.
Although I aware that it is generally economist's domain,I wish to view the problem from a different light using common sense.I reverse-engineered the situation, differentiated cause and effect, and suggest a redistribution of wealth proposition. The main purpose is to counter deflation psychology. This may be applicable to contracting economy. I see the economy encompasses three players; i.e., government, business sector and people, each playing different functions. Government is facilitator and leader,coordinate the growth of the economy and providing the necessary infrastructure for the growth of the economy. The actual growth engine is business sector. People constitute internal consumption of resources.
As economy begins to contract, business sector and people scrimp and cut back demand and consumption forecast, it further shrinks economy and this downward spiral start to snowball. The crux is to arrest the situation before it become worse.
Unemployment and reduction in disposable income are the sources of expectation cut back. Dampening demand and growing losses further reduce corporate demand, retrenchment, freeze or cut wages. The economy is shrinking, the business sector and people are getting smaller and smaller in the pie distribution. It does not help to revive the economy. To counter the situation, government should take a lead to redistribute wealth,cut tax, not only corporate tax, because there will be no cash flow impact if company incurred losses, also other related business taxes and levies that effectively transfer wealth from government to private sector. When economic performance improve, government is clever to impose and revert tax to original position.
By doing so, private sector is able to pay better wages to people and use the "extra" resources for growth increasing the multiplying effects. Although government can increase expenditure in infrastructure, that only benefits certain sectors. And these infrastructure expenditure must result in increase productivity (i.e., increase economy output). Redistribution of wealth to private sector increase the velocity of money flows through multiplying effect faster than the public sector. Original demand cut back and retrenchment are inevitable. As the bottom line turns blue and company has more cash reserves, confidence in private and people restore and will further fuel demand growth. Therefore, government and private sector must be willing to share the pie--redistribution of wealth. Government as leader must be pro-business, take the lead to open new market to create demand, reduce unemployment; for example, revive tourism sector, this will help in airline, travel, Hotel, consumer sectors.
Weaken regional currencies certainly an attraction to the west to visit Japan and the region. A deliberate and coordinated plan of regional package tour will certainly help Japan and regional countries. Revived tourist sector will create more jobs and bring in foreign reserves. Government role is to facilitate growth and explore new opportunities (domestic and export).Of course, Japan has the uphill task to shake up its banking sector. This requires courageous and determination to break up with the old system.
I used to admire some of the Japanese systems such as Quality management, Kaizen, Just in time (Probably now scrapped due to traffic congestion),Toyota production system, TPM, Target costing, empowerment and knowledge management. Many of the leading edge companies in the west adopted Japanese companies' best practices. Japanese is also innovative to convert invention to creative products. I hope team spirit will help Japan sail through economic crisis. A strong and stable Yen not only help Asian economy. It is also an emblem of strong Japan economy.
The ferocious waves of Yen devaluation swept through Asia, the domino effect caused the currency crisis stricken countries saw their currency value plummeted precipitately, dollar best value was around 1.46 Yen. Some pessimistic analysts predicted the Yen would easily cross the threshold of 150. However, I read another news said that the true worth of Yen was around a dollar to 95 Yen. Whether the results were derived from the crude purchasing power parity theory or sophisticated modelling techniques.
The volatility of currency value created havoc in the world currency market. Hopefully Behavioural Finance will be able better explain the phenomenon.Yen kept plunging albeit BoJ 's intervention. Panicky countries abjectly urged G7's to coordinate their efforts to prop up Yen's value. The question is: Is central bank intervention an effective measure to resolve sagging Yen's problem? Yes, it can be a short term measure, but not an effective long term solution.Japan suffered from deflation since early 90s due to asset bubble in the late 80s.
The economic problem entangled in political problem exacerbated the economic slowdown.Despite change hand frequently at the helm , none of the political parties have taken bold measures to pep up the economy.The recent statistics showed Japan economy was already in recession.Japan's economic problems have some similarities compared to that of Asian countries, such as sagging market confidence, increasing unemployment, collapsing asset prices and weak banking systems and mountainous debts at private sector.
The differences are Japan has huge foreign currency reserves (current account surplus), large enough to ward off currency speculators and absorb bad debts at banking sector. That gives Japan an option whether to invite capital inflows as compare to cash crunch in Asian countries. After all, national sovereignty is still prevail in Asian countries, they grudged surrendering their economies to the foreign investors and perceived it as a plot.
Japan has probably the lowest interest rate in the world. Its official discount rate is about 0.5%, government bond is about 1.2%. The low interest rate and weak capital market resulted capital outflows making Yen deteriorate than ever. Ageing population and falling prices paint a gloomy picture for corporate growth.Some Chicago elites urged to increase interest rate.
MIT professor Paul Krugman advocated to keep printing money to increase inflation rate and drive real interest rate to negative level, thereby creating new incentivesfor firm to invest. Milton Friedman also for the idea of increase of money supplies. Although they offered incongruous views, they are eminent economists and their advocacy are based on monetary theory. Although I aware that it is generally economist's domain,I wish to view the problem from a different light using common sense.I reverse-engineered the situation, differentiated cause and effect, and suggest a redistribution of wealth proposition.
The main purpose is to counter deflation psychology. This may be applicable to contracting economy. I see the economy encompasses three players; i.e., government, business sector and people, each playing different functions. Government is facilitator and leader,coordinate the growth of the economy and providing the necessary infrastructure for the growth of the economy. The actual growth engine is business sector. People constitute internal consumption of resources. As economy begins to contract, business sector and people scrimp and cut back demand and consumption forecast, it further shrinks economy and this downward spiral start to snowball. The crux is to arrest the situation before it become worse.
Unemployment and reduction in disposable income are the sources of expectation cut back. Dampening demand and growing losses further reduce corporate demand, retrenchment, freeze or cut wages. The economy is shrinking, the business sector and people are getting smaller and smaller in the pie distribution. It does not help to revive the economy. To counter the situation, government should take a lead to redistribute wealth,cut tax, not only corporate tax, because there will be no cash flow impact if company incurred losses, also other related business taxes and levies that effectively transfer wealth from government to private sector. When economic performance improve, government is clever to impose and revert tax to original position.
By doing so, private sector is able to pay better wages to people and use the "extra" resources for growth increasing the multiplying effects. Although government can increase expenditure in infrastructure, that only benefits certain sectors. And these infrastructure expenditure must result in increase productivity (i.e., increase economy output). Redistribution of wealth to private sector increase the velocity of money flows through multiplying effect faster than the public sector. Original demand cut back and retrenchment are inevitable. As the bottom line turns blue and company has more cash reserves, confidence in private and people restore and will further fuel demand growth. Therefore, government and private sector must be willing to share the pie--redistribution of wealth. Government as leader must be pro-business, take the lead to open new market to create demand, reduce unemployment; for example, revive tourism sector, this will help in airline, travel, Hotel, consumer sectors.
Weaken regional currencies certainly an attraction to the west to visit Japan and the region. A deliberate and coordinated plan of regional package tour will certainly help Japan and regional countries. Revived tourist sector will create more jobs and bring in foreign reserves. Government role is to facilitate growth and explore new opportunities (domestic and export).Of course, Japan has the uphill task to shake up its banking sector. This requires courageous and determination to break up with the old system. I used to admire some of the Japanese systems such as Quality management, Kaizen, Just in time (Probably now scrapped due to traffic congestion),Toyota production system, TPM, Target costing, empowerment and knowledge management. Many of the leading edge companies in the west adopted Japanese companies' best practices. Japanese is also innovative to convert invention to creative products. I hope team spirit will help Japan sail through economic crisis. A strong and stable Yen not only help Asian economy. It is also an emblem of strong Japan economy.
