Unconventional Wisdom - Japan may be left holding the bag ::Macquarie Research,

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Unconventional Wisdom
Japan may be left holding the bag
Event
 The Japanese Yen has risen sharply against a number of important
currencies.
Impact
 Although the Yen has stabilised against the US$, the recent strength of the
US$ has meant that the Yen has appreciated against Asian and European
currencies.
 Unlike the US$, the starting point for this appreciation was high. The last thing
that the Japanese economy needs is currency strength yet this is exactly what
is happening.
 This could increase the pressure on Japanese policymakers to implement
further stimulatory measures, such as more aggressive currency intervention.
Analysis
 Switzerland has had some success in capping the rise of the Swiss Franc
(CHF) against the Euro. This is despite a bout of Euro weakness during the
latest upheaval in European financial markets.
 This does not mean that the CHF is weak. Indeed the Swiss real effective
exchange rate is still very high even though the peak may have passed. By
comparison, the Yen does not look that expensive.