posted December 06, 2004 12:00 PM              

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Japan Threatens Huge
Dollar Sell-Off
By Heather Stewart in Tokyo
The Observer - UK
12-6-4

Japan is warning the White House that there will be 'enormous capital flight' from the dollar if the Bush administration maintains its laissez-faire approach to the mounting currency crisis.

Tokyo fears that Japan's strongest economic recovery in a decade could be derailed by the sudden appreciation in the yen against the greenback.

The criticism of President Bush's inaction, by a senior member of the ruling Liberal Democratic Party, will be taken as a veiled threat that Japan could start to sell off its multi-billion-dollar holdings of US Treasuries. 'The Japanese government is going to ask for a strong dollar policy; if it continues to fall, there would be enormous capital flight from the dollar,' said Kaoru Yosano, chairman of the LDP's policy council, adding that Japan would be calling on its fellow G7 governments to demand the US deal with the massive fiscal deficit that has helped to prompt the dollar's decline.

Yosano's remarks echoed a warning from a senior Japanese Ministry of Finance official that if the US does not push up interest rates to make the dollar more attractive, 'the one-way sentiment on the dollar will have a negative impact on the flow of capital into the US.' He added that Japan is urging its European counterparts to join a campaign of coordinated currency-market intervention, saying: 'If the dollar is depreciating, we should have coordinated action: that has already been communicated to my European counterparts.'

Like Japan, the eurozone fears that its tentative recovery could be choked off by the fall in the dollar, which European Central Bank president Jean-Claude Trichet has called 'brutal'. However, the ECB has so far dismissed the idea of intervening.

Japan is taking a double hit from the decline in the dollar because the Chinese renminbi is pegged to the US currency, so Japanese exports are simultaneously becoming sharply dearer in both their major markets. Takeo Fukui, the chairman of Honda, admits, for example, that an appreciation of 1 yen against the dollar, if it lasts for more than three months, knocks 10 billion yen off the carmaker's profits.
http://observer.guardian.co.uk/business/story/0,6903,1366578,00.html

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posted December 06, 2004 09:56 PM              

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i understand that when the euro went on the market in 2000, saddam hussein converted most of his u.s. dollars to euros
every1 thoght he was crazy to take such a hit since the euro was like 3\4 a dollar but a year later it was worth like 20 cents more than a dollar and every 1 was jealous...so the iranians converted like a third of their currency also which started making the japanese nervous....

japan owns like a QUARTER of the u.s. dollar reserves, so if they decided to bail it would crush our economy......
that is a theory to explain why bush would invade iraq, so they would be back to a dollar standard with all that oil....

at about the same time nixon cut the dollar from its gold standard, he cut the deal to train and equip the saudis military and intelligence(bush sr's job), in return the saudis purportedly pegged their currency to the u.s. dollar for all future oil transactions...which sustains a large part of our economy......

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posted December 06, 2004 10:21 PM              

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Whoa ....this is pretty fiscally deep. Not that I know nothing about money. I do invest a bit but I definitely need to read up on this one. Thanks for the post, Gia!

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posted December 08, 2004 02:05 PM              

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Unreal!

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