Ex-BOJ Board Member Predicts Japanese Economy Collapse Unless Yen Weakens

It has been a while since I last took a deep look into the moribund exchange rate between the U.S. dollar and the Japanese yen. Things don't look good.

According to Bloomberg.com:

The yen surged to a postwar record of 75.35 per dollar on Oct. 31, spurring the government to intervene in markets for the third time this year. The currency, which traded at 78.03 as of 9:14 a.m. in Tokyo, hasn’t been at 100 since April 2009.

It appears that the latest intervention by the Japanese government did very little to stop the further sinking of the dollar against the yen. It is disheartening to see that the dollar hasn't exchanged for 100 yen since 2009. For my April 2007 trip to Japan, I was able to get 116 yen per dollar exchanged. Last year, the dollar/yen exchange was in the 80s. I got around 85 yen per dollar exchanged.

It used to be the axiom about Japan travel that travelers should spend all money exchanged to get full value. Now, it is the opposite. Travelers to Japan should save as much as they can to get more dollars for every yen exchanged. Last year, I got $115 per every ¥10,000 exchanged at Narita Airport.

All this doesn't help the Japanese tourism industry, merchants or Japanese exporters (Toyota, for example). This leads to exporters' overseas profits to drop, causing major concern amongst Japanese economists. If tourists (who do come to Japan) don't spend their money on goods and services, Japanese businesses will be headed to bankruptcy.

A former Bank of Japan board member said:

“The Japanese economy will collapse unless the yen weakens to 100 per dollar,” Nobuyuki Nakahara, who served as a policy board member between 1998 and 2002 under then BOJ Governor Masaru Hayami, said in a Nov. 4 interview in Tokyo. “It’s never too early to hammer out further stimulus.”

While the Japanese tourism industry is showing signs of recovery since the Great East Japan Earthquake of March 11, the problems of the too-strong yen vs. foreign currencies will further hamper recovery efforts in the months ahead.

To read the full Bloomberg article, go here.