Sunday, November 29, 2009

How to lose a point of GNP in a day


Step 1.
Have ~30% of your GNP be generated by US$-based export trade.

Step 2.
No matter how many warnings you hear, or how bad the trends have been for almost 2 years (since the Americans started the proverbial printing presses to cover massive government red ink)... even as you watch the en (Japanese Yen) muscle up from an arguably overstrong 110-to-the-$ range into the low 90's... do *nothing* to increase availability of the en. Be particularly insensitive to fears that deflation will return to the Japanese economy.

Step 3.
Lose over 3% of your exchange rate on recovering said dollars into your national currency in a single trading day.
...a 14-year high of 84.82 to the dollar...
Voila! It is done.

Seriously... it happened about that way; that's a fact that even the hatoyama naikaku (Hatoyama administration) is waking up to. The question now is:

With deflation already present in the economy *again*, and the loss of domestic consumption that brings with it well underway... is *this* too little, too late?

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