I never cared much about the currency markets before moving out of the U.S.
Euro, yen, dollar… those words zoomed by on the bottom of the business news tickers, the numbers behind them always fluctuating up and down, seemingly meaningless in my single currency world.
Then I moved to Japan, and like many American expatriates, I got a crash course on the impact of the currency market on my wallet.
When I moved here almost three years ago, the Japanese yen was hovering around 120, 110 versus the U.S. dollar. Now mid-August 2010, the yen is smack dab in the 80’s. The cost of living for me, and many people who are paid in dollars but live in a yen world, has gone up percentage wise double digits, through no fault of our own except for a weakening dollar.
Michigan native Paula Shioi remembers the days of the 300 yen versus the dollar, when she was in high school a few decades ago. Since then, the value of dollar has done nothing but go “down, down, down,” said Shioi. If the dollar strengthens versus the yen, “then I’d make a lot more money,” sighed Shioi.
But that’s not the way the markets are heading, said Professor Eisuke Sakakibara, at Aoyama Gakuin University.
Sakakibara has the unusual nickname of “Mr. Yen” in Japan, known for accurately predicting the trading level of the yen. But the public started calling him Mr. Yen in the late 90’s, when he worked at the Ministry of Finance, trying to influence the dollar-yen exchange rates through public comments.
Sakakibara continues to make public comments and forecasts where he feels the yen will head. Earlier this year, he predicted the yen would strengthen into the 80’s. I sat down with Professor Sakakibara recently, the yen 85 versus the dollar.
“I think it will head down to 80,” said Professor Sakakibara dispassionately, as I cringed at his words. “And I think by the end of the year, it will break the highest level of the yen in 1995, which is 79, 78.”
Really? Can it be? I asked, secretly hoping he’d take it back.
“Of course it’s possible,” said Sakakibara.
50? 60? Is that possible?
“No, I don’t think so,” he said, much to my relief. Then with the professorial kindness you’d expect from a wizened elder, Sakakibara explained the currency markets are not as important for the impact on American expatriates like me, but as a sign of the world’s changing economy order.
“It’s not necessarily the yen strength we should be talking about, but weakness of the dollar, weakness of the dollar and euro. The center of the gravity of the world economy is now shifting towards Asia. China, India, and East Asia, are gaining strength, relative to countries like the US and Europe. This is the trend.”
It’s why Sakakibara also doesn’t advocate currency intervention, absent sudden and large spikes or dips, because the currency reflects the changing world economy. Sakakibara talked on about his predictions of a common Asian currency, like the euro, for China-India-Japan. A currency that might one day take over the dollar as the world currency, as the U.S. economy loses its dominance in the next century.
Americans living overseas are just getting a front seat to the changing world economy. Personally painful at times, but a change that Mr. Yen says is coming, ready or not.
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