Tuesday, September 14, 2010

Japan awakes?

With the DPJ power struggle behind it, PM Naoto Kan’s government has taken a decisive step: buying dollars for the first time in six years. Of course, being Japan, there is no policy statement about what the government is targeting in terms of $/Y or inflation. "Minor policy adjustment." But it is a major first step on the road to financial sanity.

I hope they have taken a page out of FDR’s book: keep buying until the dollar and domestic prices start rising, and then keep buying until expectations are decisively changed: yen will not appreciate further, prices will never decline again.

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