Re: [tlug] How much of radiations measured in Central Tokyo?

["Stephen J. Turnbull" <stephenjturnbull@example.com>]

On Thu, Mar 17, 2011 at 10:32 AM, Jean-Christian Imbeault
<jc.imbeault@example.com> wrote:

> Speaking of economic consequences, why is the yen so strong now? I
> understand that the yen is usually the go to safe-haven currency but
> Japan is anything but a safe haven right now.

It's a mystery to me.

If you're willing to listen to some semi-educated guesses, I would
guess there are three factors.  One is that Japanese are importing
less; to Japanese, almost all imports are luxury goods.  Another is
that in response to the uncertainty, Japanese companies are pulling
out of overseas investments and repatriating capital to the home
country.  Third, in response to lower domestic demand they're pushing
exports even more, and once again repatriating the proceeds to Japan.
There's also strong investment demand from Asia in Japan; land prices
are at (recent) historical lows, and Japan is an attractive place to
locate a second home for the Chinese new rich -- cheaper than
Shanghai, with far more amenities than Inner Mongolia.  We're also
seeing a lot of FDI from China, often aiming at acquiring technology.

I've been meaning to look into this for a while.

> Notwithstanding the earthquake and nuclear reactor problems all the
> spending and debt Japan will need to go into in order to rebuild I
> would think would make the yen weaker, not stronger.

Except that Japan has very little external debt, and it seems unlikely
that it will increase in current circumstances; who would lend to
Japan?  Maybe China, but U.S. government pays a lot better even after
inflation, and having the club of withdrawing investment over the U.S.
is more attractive than using it to influence Japan, which continues
to be scared of its own shadow in foreign policy.  Japan has a lot of
mechanisms (eg, postal savings) designed to ensure a huge pool of
capital under control of the government, which historically has used
it to expand government services and to support lending to industry.
This is why Japan can have a far larger debt-to-GDP ratio than say
Greece, and still maintain AA or so ratings from Moody's.

> Then again I never did understand global economics ...

Heh.  Nobody understands money very well.  Trade is easy to
understand, the devil is in the details.  But there's very little
agreement among economists on what  money is *for*, let alone how it
affects the economy in detail.