IMF “Accepts the Weak Yen“

International Monetary Fund expressed its opinion in the `Revised World Economy Prospect` that Japan has to carry out an economic alleviation even at the risk of the weak yen in order to prevent deflation. It`s the first time that IMF expressed its acceptance of the weak yen.

IMF pointed out that "the financial system is becoming unstable by the deepened economic slowdown. Japanese banks need to support the financial system by the additional financial alleviation even at the risk of the weak yen."

The foreign exchange market analyzed the IMF`s opinion as urging Japan to expand the liquidity through the purchase of foreign currencies.

By the IMF`s acceptance of the weak yen, the possibilities for the additional devaluation of yen became high and the Japanese government is obliged to offer a new financial policy to prevent deflation.

Both the Japanese government and the U.S. government have expressed their intention to approve the weak yen with the condition of the Japanese restructuring.

IMF indicated the unstable factor of the Japanese economy as `the vicious cycle of the weak financial system and the continuous bankruptcy and the increased insolvent bonds. IMF advised Japan to restructure the financial area and to put a public fund to treat the insolvent bonds.

Young-Ee Lee yes202@donga.com