Japanese central bank intervenes to weaken Yen, boost exports (+ analysis); Pentagon speeds up plans to cut $100 billion; Karzai could get bigger anti-corruption role; French senate bans burqa; and more

Top of the Agenda: Japan Intervenes to Weaken Yen

Japan's central bank intervened in currency markets for the first time in six years to weaken the value of the yen against the dollar (BBC), a day after the yen hit a fifteen-year high against the greenback and threatened the country's export-led growth. The weaker yen makes Japanese exports less expensive and increases profits when earnings are returned to Japan. Shares in exporters Honda, Canon, and Sony rose after the government intervention (Reuters).The yen had spiked after news that Japanese Prime Minister Naoto Kan--who traders thought would refrain from weakening the yen--survived a leadership challenge from rival Ichiro Ozawa. Finance Minister Yoshihiko Noda said the yen's rapid appreciation threatened to destabilize Japan's already weak and deflationary economy. Other central banks in Korea, Singapore, and Taiwan may be more likely to increase their dollar purchases to protect their exporters after Japan's move (WSJ). It will also likely heighten tension around the issue of China's continued intervention to hold down the value of its currency, as the US Congress holds a series of hearings this week to investigate blocking Chinese imports or taking the issue to the World Trade Organization (FT). Japan's currency move makes it harder to single out China as the only major economy that is manipulating its currency.

Analysis:

On CNN.com, Kevin Voigt says the difference between Japan's "intervention" in currency markets and China's "manipulation" of the yuan is mere semantics in economic terms and driven by politics.

On TIME.com, Michael Schuman says a weaker yen is a policy crutch that allows Japanese politicians to avoid tougher economic reforms. Since every country wants to export their way to recovery, including the United States, the world risks sinking "into an era of beggar-thy-neighbor policies that end up hurting everyone."

On WSJ.com, James Simms says Tokyo's intervention will "find its efforts spoiled if the US Federal Reserve undertakes a second round of quantitative easing." Already-low US interest rates have contributed to the yen's strength.

 

PACIFIC RIM: Yuan Posts Fastest Five-Day Gain in Two Years

The yuan posted its fastest five-day gain against the dollar in two years Wednesday, as US pressure mounts again over the Chinese currency's value (EconomicTimes).

This Backgrounder examines the economic imbalances plaguing the US-China relationship.

 

ELSEWHERE:

- US Debates Karzai Role in Corruption Fight
- Pentagon Announces Tighter Spending Rules
- French Senate Approves Burqa Ban

 

This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org