Really interesting. I didn’t know that their was a Yen-Dollar exchange rate control mechanism. That sounds like it could plausibly be a major reason for Japan’s long-term economic woes. The story would go something like “late 80′s, Japan doing very well. Yen set very strong vs. dollar”. Then later “Japan has a recession, economy weaker. Yen prevented from falling by weird controls.” Leaving Japan with an overpriced currency and thus a weakened export market and weak growth.
There also an interesting point that money experiments create parasites. In Russia in 90s there was rampant money printing and inflation, but economy declined in real term in dollars. One of the reason is that people (including one my friend) took credits in rubles in bank, convert them in dollars and just wait; after a year they exchangeв back at a better exchange rate and returned the credit, taking profit and not producing any substantial. This creates additional pressure on exchange rate and was self-perpetual mechanism.
Carry-trade in Japan is probably also a type of parasite on the near-zero interest rates.
Really interesting. I didn’t know that their was a Yen-Dollar exchange rate control mechanism. That sounds like it could plausibly be a major reason for Japan’s long-term economic woes. The story would go something like “late 80′s, Japan doing very well. Yen set very strong vs. dollar”. Then later “Japan has a recession, economy weaker. Yen prevented from falling by weird controls.” Leaving Japan with an overpriced currency and thus a weakened export market and weak growth.
There also an interesting point that money experiments create parasites. In Russia in 90s there was rampant money printing and inflation, but economy declined in real term in dollars. One of the reason is that people (including one my friend) took credits in rubles in bank, convert them in dollars and just wait; after a year they exchangeв back at a better exchange rate and returned the credit, taking profit and not producing any substantial. This creates additional pressure on exchange rate and was self-perpetual mechanism.
Carry-trade in Japan is probably also a type of parasite on the near-zero interest rates.