How a weak yen will help Japan’s economy

Marketplace Staff Mar 18, 2011
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How a weak yen will help Japan’s economy

Marketplace Staff Mar 18, 2011
HTML EMBED:
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STEVE CHIOTAKIS: Japan’s currency is down today, about 4 percent. That follows an agreement among the G7, representing 7 developed economies, to intervene and weaken the Yen. The currency had reached record highs in the aftermath of the disaster in Japan.

Jill Schlesinger is editor at large at CBS/MoneyWatch. She’s with us live from New York. Good morning Jill.

JILL SCHLESINGER: Good morning.

CHIOTAKIS: We know it’s an act of solidarity for these countries to come together and help the economy in Japan in these times. But what exactly does lowering the yen’s value do?

SCHLESINGER: Well, the last thing that Japan needed at this critical moment was a strong yen. As a major exporter, a weaker yen makes Japanese goods more affordable and competitive in the global market. Economists think that a weaker yen will allow the best chance of a quicker recovery.

CHIOTAKIS: A quicker recovery. Alright, so what about the volatility of the markets then in response to the disaster almost a week to the day, right? Why is everybody still on edge?

SCHLESINGER: Well, uncertainty is the enemy of investors. And clearly this is one of the more uncertain events the world has seen. And with the outcome unclear, investors will sell their risky assets, they’ll head to the sidelines, buy some U.S. government bonds, and wait out what this situation appears to be, and they reassess the situation on a day to day basis. That’s very normal in this kind of situation.

CHIOTAKIS: Alright, Jill Schlesinger from CBS/Moneywatch. Jill, thanks.

SCHLESINGER: Take care.

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