Waiting For The Japanese Pay-Off - Charles Gave, GaveKal Capital writes: Back in December 2012, as it became clear Japan was moving towards an all-out attack...

Waiting For The Japanese Pay-Off - Charles Gave, GaveKal Capital writes: Back in December 2012, as it became clear Japan was moving towards an all-out attack on deflation, I argued that if Tokyo's shock and awe campaign drove the yen into undervalued territory, it would have a powerful deflationary impact on the rest of the world. My view at the time was that the devaluation of the Japanese currency would reintroduce a formidable competitor into the world's economic system, and that it would take roughly 18 months for the countries competing against Japanese industry to feel the effects of the yen's fall. Nearly two years later, it is time to revisit the idea, and see how things have panned out. According to my 2012 paper, the main effect of a deep yen depreciation, would be a rise in profit margins in Japan, and a corresponding contraction of margins elsewhere in the world. These effects would begin to show up after something like 18 months, and the more undervalued the yen became, the more pronounced they would be. (VIEW LINK)


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