walter russell mead peter berger lilia shevtsova adam garfinkle andrew a. michta
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The Land of the Falling Yen

Japan is under fire at Davos this week, accused of juicing its own economy at the expense of its trading partners. Earlier this week, Japan pledged to begin printing money in an attempt to bring down the yen and stay competitive against Chinese manufacturing. This has drawn pointed criticism and raised fears of a global “currency war,” the Financial Times reports:

Referring to the Bank of Japan’s move to ultra-loose monetary policy and similar action by other central banks, Axel Weber, former Bundesbank president and now chairman of UBS, warned that the spread of the approach was “heading into dangerous territory.” . . .

Mr Weber’s comments echoed concerns in China and at the central banks of Germany and the UK that Japan’s move to an ultra-loose policy was a bid to drive down the value of the yen that could lead to retaliation from other countries also seeking to boost the pace of recovery through stronger exports.

New Japanese PM Shinzo Abe’s campaign promises have kept him in the news lately. Abe was elected on a platform that was most notable for its aggressive stance toward China, but that also called for reinvigorating Japan’s economy through quantitative easing. One month into his premiership, he is already making good on this promise. Earlier this week, the Bank of Japan bowed to pressure from the Abe government (a big no-no in the world of central banks) and pledged to buy back a potentially unlimited number of government bonds, earning itself a chorus of rebukes from the rest of the developed world.

But the critics are attacking Japan for doing exactly what the other big economies have done: running the presses like there’s no tomorrow in a desperate attempt to flog the economy back to life. What really irks the Europeans, Chinese, and Americans about Japan’s new monetary policies is that Japan is stepping away from the role of global patsy and will no longer let its currency rise when others fall.

World leaders’ hypocrisy aside, the real problem is that none of these tricks seem to be getting economies in the advanced countries back on track.

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