Currency Wars, Boon for Sovereign Fund Asset Growth

Japanese Prime Minister Shinzo Abe desires the central bank to ease monetary policy to counter deflation and encourage export-led growth. Trillions of yen are to be pumped into the Japanese economy from asset purchases. Tokyo’s foreign-exchange policy could be a catalyst for a future Asian currency war. The Bank of Japan (BOJ) announced an open-ended easing plan and a 2 percent inflation target to stimulate growth. Many economists are worried about the Bank of Japan losing independence and caving to executive political pressure.

The government of Japan is adamant that the reason for this is to combat deflation and revive growth.

At the 2013 World Economic Forum in Davos, Bader Al-Sa’ad, the managing director of the Kuwait Investment Authority (KIA) informed news sources that, “the only fear is the decline of the yen. The decline of the yen could trigger a currency war in the countries of Southeast Asia; this is the only fear we have at the moment.”

Japanese public officials quickly countered that far and few complaints regarding trade advantages were brought up when U.S. and European economies embarked on quantitative easing policies. There is possible political consequences with China, a weakened yen might provide fuel for China to slow down renminbi appreciation. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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