Low Yen Getting Accepted

▽ Desirable value of yen: 150 against dollar = In the Tokyo market, the theory of a reduced lower yen is getting widespread, pulling down the value of yen for three consecutive days, or 2.3 yen against dollar. As of 5 p.m. yesterday, yen stood at 124.7 yen per dollar.

What triggered the downfall was the remark of Japanese Finance Minister during his Dec. 1st lecture. He said, "Considering the circumstances around the world, the proper value of yen is somewhere between 150 – 160 against dollar." Another senior Japanese official confirmed in his Dec. 2nd column to The Financial Times that some Japanese banks want to lead the market with lower yen, demand more measures to relieve the financial market.

In sum, the Japanese government believes that the value of yen is set too high, considering the current status of the Japanese economy.

In fact, the OECD indicated last year that the "¥150=$1" level would best reflect the real market situations in Japan and USA. In October, Morgan Stanley also announced its prediction of "¥165=$1." Accordingly, Japan is now looking back on its "strong yen" policy that has been enforced ever since 1985. The Japanese believe that the policy has eroded the competitive edge of Japan in the world market.

▽ Strong reactions of neighboring countries = Japan in substance has allowed the falling down of yen since the turn of last year. As a result, yen plummeted to 135 by the end of January. The slowing US economy, however, has pulled up yen`s value again, reaching up to 119 by last month.

The "lower yen policy" of Japan is conceived to get its stagnating economy out of depression and boost it with more exports. One investment bank predicted that a 10% fall of yen`s value would boost the export by 1% and the consumer price by 0.3%. In the end, it would increase the GDP by 0.4%.

Most countries such as South Korea in competition with Japan in export would be dealt a severe blow, if the value of yen should plunge down to 150. Asian companies have conducted business, assuming that yen would remain at around 125 against dollar. They criticize Japan, saying that lower yen would push other countries into poverty.

Young-Ee Lee yes202@donga.com