A lot has been made of so-called Abenomics after comments in Japan about forcing the central bank to set and defend a 2% inflation target. Getting a consolidated government balance sheet from a fiscal and monetary agent working hand-in-hand would be a true paradigm shift. Nonetheless, in truth, until we actually see action, this latest move by the Japanese is just another salvo in the ongoing currency wars.
The real goal of incoming Japanese Prime Minister Shinzo Abe is to depreciate the Japanese Yen in order to boost exports. And while the talk about creating a unified monetary and fiscal regime has certainly made the Yen weak, this effect is only temporary. What really drives exchange rates is real interest rates and that means we need to see Japanese interest rates minus inflation sink...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.