In this piece on Bloomberg, Mark Carney (the govenor of the Bank of Canada, and soon to be governor of the Bank of England) points out that the criticism of the BOJ for the drop in the Yen isn’t fair:
Speaking on the same Davos panel, Bank of Canada Governor Mark Carney commended Japan’s focus on beating deflation. Carney, who will move to the Bank of England in July, said Amari had been “very clear and the Bank of Japan (8301) is clear in terms of the policy focused on a domestic inflation target.”
As long what is going on is consistent with an underlying inflation/NGDP target this is just normal monetary easing, not “beggar they neighbour intervention”. I noticed that a lot of people keep throwing out this currency war myth, even in NZ, but as we have discussed in a number of posts listed here it is simply a myth.
Truly, if people are concerned about the “plunging Yen” they need to ask why – is it because they have left monetary conditions too tight in their own countries? If so, that is really just their own fault. If domestic monetary conditions aren’t too tight we actually have to ask what the issue is – and if there is an issue it will be to do with direct market failure or government policy, it will have nothing to do with rule/expectations based monetary targeting.
Sidenote for New Zealand: If you are really worried about our “competitiveness” instead of going on about the currency – ask why New Zealanders are so willing, and able, to borrow from overseas. It is the fundamental drivers of that phenomenon that are inherently related to any lack of competitiveness – the nominal currency is a symptom, a by-product, of the fact that New Zealand consistently invests more than it saves … and tends to not make a sufficient social rate of return on that investment. To “solve” any perceived problem, we need to actually ask why in this context, rather than arbitrarily attacking things.