Forex Trading: The Weak Japanese Yen and Exports

Exports are the crux of the Japanese economy. The Japanese economy depends on exports, exporting to the United States, China, South Korea, Europe, and other nations.

A strong currency makes exports very pricey for overseas buyers. Having an export-based economy, Japan desires the Japanese Yen to be weak. Japan manufacturers long for a weaker Yen so, theoretically they can sell more goods.

Shinzo Abe has returned to the Prime Minister position and is looking to weaken the Yen exponentially.

O’Neill, chairman of Goldman Sachs Asset Management in London England said “If the BOJ starts to treat inflation targeting as a genuine target and not a goal, then it is very important and could result in notable yen weakness,”. He also said, “The yen has been unjustifiably overvalued since the Lehman collapse,”.

The Lehman Brothers collapse was like the Pearl Harbor event of the recent 2008 financial crises. O’Neill predicts the USDJPY will reach between 100 and 112 in 2013. (WSJ blog)

This is the monthly USDJPY chart dating back to the 1990’s. As new policies at implemented, Forex Trading will continue to be interesting for the USD/JPY.

USDJPY_Monthly

In the coming months, and possibly even more in April once the current BOJ governor is replaced, Japan could be intentionally targeting inflation at a large scale.

The Japanese economy has shrank almost 10 percent in the years since Abe lost his position as prime minister. (Bloomberg) In the coming years with government trying to weaken the Yen, there could be a turn around for the Japanese Economy, or quite the opposite. The Japanese Yen’s Weakness in the Forex market is a critical thing to keep your eyes on.

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