Yen Decline

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It isnot exactly a collapse of course, but it is certainly a readjustmentthat properly reflects the collateral position Japan occupies withChina and the USA. It is still noteworthy and suggests a strongburst in Japanese growth is now pending. At the same time it isdefensive and markets out uncertainty regarding both China's and theUSA's financial posture.
Inthe meantime, Japan is liquidating the tsunami damage in good orderalthough it will require several more years for that to be finished.
Rumorsof war are more to do with internal infighting in China than anythingelse.

Here's What'sBehind The Collapse Of The Japanese Yen — The Biggest EconomicStory In The World

Joe Weisenthal | Dec. 27, 2012
http://www.businessinsider.com/why-the-yen-has-been-getting-crushed-2012-12


Earlier we joked thatlost in all of the Fiscal Cliff shuffle was the fact that the yen hasbeen getting clobbered.
SocGen's FX guruKit Juckes jokingly responded that far from getting "lost"the yen carnage was actually the only game in town

Indeed thisis really the huge story in global markets right now. In addition tobeing a major shift in one of the world's biggest and strongestcurrencies, it affects all sorts of manufacturers who do business inyen, or compete with companies that do business in yen.
Here's a three-yearchart of the CurrencyShares Japanese Yen Trust, an ETF that'sdesigned to track the yen. As you can see, it's been collapsing, andis now at a level that hasn't been seen in over two years.
what's causing theyen carnage?
There's actually noone thing.
But a few of them are:
-- Shinzo Abe: Japan's new Prime Minister (who took officeyesterday) has pledged to force the Bank ofJapan into ultra-easy monetary policy, and he's even favored bondpurchases for the direct purpose of funding stimulus money.
-- Japan's tradesituation also seems to be deteriorating. Whereas previously thecountry was running big, consistent trade surpluses, it's now insteady trade deficit.
-- The US economy is strengthening. This isn't about the yen, butit does help boost what the yen is being compared to, the dollar. Astrengthening economy helps contribute to rising US interestrates,which will help the US dollar.
-- There's a beliefthat the endgame is in sight for the Fed to start ending itsultra-easy monetary policy. Things aren't going to change overnight,but at the current pace of economic improvement, the Fed's goalscould be hit in late 2014, which is earlier than the previous 2015tightening guidance. A tighter US monetary policy would benefitthe dollar against the yen.
-- End of the Eurozonecrisis. Japanese assets had been seen as "safe-havens" toflee too during the crisis. With the Eurozone crisis ending, thatsafe-haven bid begins to deteriorate.
-- Fear of war? Also thanks to Japan's new PM Shinzo Abe, thecountry is likely to adopt an even more aggressive, militaristicstance towards China. One professor in Australia predicts war. AsMatt Yglesias notes, any war (or war preparations) would likely befunded by aggressive money creation. More yen weakening.
-- Japan's economy isbad. In addition to all that, the economic data in Japan isdeteriorating again, creating more reason for the Bank of Japan to donew measures.
One interesting trendis that a lot of these developments are fairly new. Sothere's a confluence of a lot of stuff happening right now.
Two other notes:
One is that this isn'tnecessarily a bad thing at all. A weaker yen is itself a form ofstimulus, and should help the country's domestic manufacturers.Nomura recently upgraded the Japanese automakers specifically onthis, and in general the Nikkei has been on a total tear.
The other is that noneof the above have anything to do with the typical Japan beararguments about massive national debt and bond collapse. Those thingsthat people freak out about don't have much to do with things.

Read more:
http://www.businessinsider.com/why-the-yen-has-been-getting-crushed-2012-12#ixzz2GNTvwDH0