July 22, 2010

Japan Revisited

Japan has painted itself into the mother of all corners. Well not exactly. More accurately, the market has painted Japan into the mother of all corners, and Japanese policy makers let them.

At this juncture, Japan needs to address the stranglehold that the yens relative value has on the Japanese economy. Japan needs to turn on the printing press and start using its fiat currency to buy real assets.Using debt to spur domestic growth is already a proven failure. At this juncture, any government debt for asset swap would be accretive.

While Japanese debt is largely held in domestic hands, Japan needs to shore up its balance sheet now. Waiting until they need to tap global lenders will prove their undoing. Printing and buying assets now, will give them something to sell when they really need to defend their currency.

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