And the Winner is...

... the JPY, and that could let Japan in the deep sh... well let's say in not a so comfortable situation. Once again.

At the beginning of the year, the EUR was pressured on concerns on the European sovereign debt to the point that some predicted the "disintegration" of the currency (Volker) or merely saw it "doomed" (Gartman). Since June, the USD has at its turn been pressured with bad US economics data. As a result, the USDJPY dropped from 95 to 85 and without the new Japanese government being able to act against or control the appreciation of the JPY.

More than 20 years ago, at a time I had the project to become a footballer, fireman or King of France, I could remember how everybody was wondering how Japan would eat the whole world and when as it was considered as only a matter of time, how everybody was admirative of their business model (a system of cooperatives that allowed the companies not to focus on short term profits as the debt was not externalized and centralized governmental organs to guide the whole Economy "Guys, let's focus on VHS players and when we'll reign supreme there, we'll let you know what to focus on"). And then, the nightmare began and the country was sent to Deflation for 2 decades. Everything, Quantitative Easing, Banks Bailouts, various stimili, basically all the arsenal we can see now... has been tried but probably too late and too small and nothing had seemed to be able to allow them to get out. That shows, as an argument in the "austerity vs growth" debate, how, while the ways to fight inflation seem nowadays more or less efficient, the fight against Deflation is not really under control. The worst thing is maybe that after 2 decades, Japan finally managed to put the head out of the water thanks to prospects of inflation... but with the worst of the timing : something like one year before the subprime crisis started...

Now with a strong Yen that make it uncompetitive and that might push it to Deflation again, I'm curious to see what will happen to Japan. Maybe it's high time to consider a short Nikkei, we'll see...

---------------------------------------------------------------------
Comment this post
FYI As this post is published: SPX 1118 // SX5E 2801 // NKY 9551 // DAX : 6279 // EURUSD 1.3125 // USDJPY 86.08 // XAUUSD : 1191