Darryl Whitten on the BIS Annual Report

June 28, 2007
By Ken Worsley

On Tuesday, we reported on the recent annual statement from the Bank of International Settlements, which called the yen’s current value ‘Anomalous’. Since then, there has been little commentary about the report in any media. Today, a piece entitled BIS Report Calls Recent Yen Depreciation ‘Anomalous’ from The Japan Investor’s Darryl Whitten appeared on Seeking Alpha.

It’s a short article, but good. Mr Whitten has been on the ground in Japan for a long time and knows what he’s talking about, and in this piece he offers a view of the risks surrounding a weak yen. Here’s a snippet:

The negatives for Japan from a weak yen include,

1. Rising raw material purchasing costs for companies.
2. Increased reliance on exports.
3. Problems attracting foreign capital (even though Japan is actively encouraging FDI).
4. Growing inflation pressures (from rising corporate service prices).
5. The prospect of a tsunami of domestic savings flowing overseas to chase higher yields, which already is a structural component of the so-called yen carry trade.

Get over there and read the rest of the article.

Filed Under Carry Trade, Exchange Rates, Finance