A few months back, every country was trying to devalue its currency to increase its exports. Now Japanese yen is appreciating, effectively devaluing everyone’s currency. One would think other countries would welcome it. But G-7 intervenes to stop yen from rising. Why? If Japanese yen rises, it increases the cost of components that Japan exports to companies in other countries. This, in turn, increases the cost of goods these companies make that may imperil the economic recovery. Hence, everybody joins hands to help depreciate yen.
This reminds me of a line from Yes Minister – Oh, what a tangled web we weave!
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