With the Yen collapsing… Japan’s 3rd largest economy will be wiped out

As the Yen depreciates, Japan is predicted to lose its position as the world’s third largest economy as early as this year. It is analyzed that the low yen is seriously undermining Japan’s national power, with wages becoming similar to Korea and foreign investors leaving.

The Nihon Keizai Shimbun reported on the 19th “If the value of the yen to the dollar is maintained at the level of 140 yen, Japan’s nominal gross domestic product (GDP) in dollars this year will reach $3.9 trillion (about 5421 trillion won). ” “It will be below $4 trillion for the first time in 30 years, and it will be on par with Germany,” he added. In 2012, Japan’s GDP was more than $6 trillion, three times that of Germany. As global GDP has quadrupled over the past 30 years, Japan’s share of world GDP is projected to drop from 15% to less than 4%.

Japan’s income level is also expected to decline to the level it was 30 years ago. The newspaper predicted, “If the exchange rate is 140 yen per dollar, Japanese annual income will be reduced to 30,000 dollars, which is the level of 1990, which will be similar to that of Korea.”

They also found that the impact of rising international energy prices is greater. In dollar terms, West Texas Intermediate (WTI) futures rose 13% this year. The price of crude oil futures on the Tokyo Commodity Exchange, which is traded in yen, increased by 33%.

The Japanese stock market trended higher in anticipation that Japanese company earnings would improve if the devalued yen also disappeared. In January-August 2013, foreign investors bought a net 9.1 trillion yen worth of Japanese stocks, when the value of the Yen plunged as the Bank of Japan began large-scale monetary easing. In January and August this year, foreign investors sold a net worth of 2.7 trillion Japanese stocks. Richard Kay, an analyst at Comzest Asset Management, explained, “This is because the company’s profits are falling because they cannot pass the higher cost on to the price.” As a large number of foreign investors left, the Nikkei 225 Index fell 23% in dollar terms until August this year. This is the biggest drop since the global financial crisis (42%) in 2008.

Tokyo = Reporter Young-hyo Jeong hugh@hankyung.com

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