Brad writes: >Hmmm. Liquidating U.S. Treasury bonds means that the price of Treasury >bonds and other denominated assets relative to yen assets falls, which >means that the yen rises, which means that U.S. demand for Japanese >products falls. > >This means that (with the U.S. no longer serving as the importer of last >resort) Japan falls deeper into recession. > >Am I missing something? What's the alternative theory by which raising your >exchange rate expands your economy? My impression is that the Japanese economy doesn't go into recessions every time the Yen rises. The US has been pushing for a higher Yen for quite awhile (and has been getting it), but Japan still has a trade surplus. One thing is that Japan is highly dependent on imports of raw materials, so that a high Yen makes them cheaper. This counteracts the effect of exports becoming more expensive in dollar terms as the Yen rises. Jim Devine [EMAIL PROTECTED] & http://clawww.lmu.edu/Faculty/JDevine/JDevine.html
