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A Collapsing Trade - Japan in the Crosshairs

Wednesday, February 8, 2012, 3:21 PM
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Japan is facing two types of collapsing trade, but the one affecting Sony and Honda is a symptom of the other. 

Japan is currently being harmed first and most by a collapsing carry trade. The effect of this is to drive the exchange value of the Yen higher and higher, which then harms both the volume of exports and reduces the yen value of repatriated profits, a double whammy for an export dependent nation.

For now, Japan is simply making wounded noises, hoping the US will listen and relent. I’ll explain that last sentence in just a minute; first here’s a sample of the wounded noises:

 

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