Buy yen: pros & cons

In Japan on 21/05/2012 at 6:04 am

“The idea that the yen is a safe haven is about the most unsafe safe haven I’ve ever heard of. This is a country whose fiscal arithmetic makes Greece look like Switzerland,” independent strategist David Roche told CNBC.

But Eisuke Sakakibara, Japan’s former vice finance minister, also known as “Mr. Yen” said that while it was true that Japan’s government debt was 180% of gross domestic product, its household financial assets were about 240 percent of GDP.

“We will not have a financial crisis for another four-five years”.

While many “experts” say the market was likely to try to push the yen higher to test the Japanese authorities’ willingness to intervene, as the Swiss central bank did when it believed the Swiss franc’s strength was hurting exports. But Sakakibara said Japanese exporters could survive with a yen around 80 for the dollar and 100 for the euro, and only if it appreciated in the low 70s or 60s against the dollar would it become a problem.

“I don’t think it will go down to 72, but it is likely that the yen-dollar rate will go into the 70s and probably will hover around 78, 79 for a while and that wouldn’t be a major blow to the Japanese exporting companies,” he said.

“Japan is a much bigger country than Switzerland and we cannot do what Switzerland has done,” Sakakibara said, adding that intervention was unlikely to take place at the rate of 78-79 to the dollar but only if the yen goes as high as 72.

Heck, still to S$.

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