August 12th, 2010
01:30 PM GMT
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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.

soundoff (22 Responses)
  1. whale

    Periodically the trend is shifting to Asia economy might,it is of no doubt at this point the necessity to implement a replacement world currency to stabilize the uncertainty of the world economy.The uncertainty looming in the US economy needs urgent checkmate.instability of the dollar is a major blow to sustain a precise economy recovery.

    August 13, 2010 at 1:12 am |
  2. Borabora86

    I am in the opposite boat. I am an English teacher living in Japan getting paid in Yen. I send large amounts of Yen home to my American bank account so it turns into a gold mine once it gets converted into American dollars. I like this trend ;)

    August 13, 2010 at 1:12 am |
  3. Team Iron Rice Bowl

    I guess it makes getting a job in Japan an attractive opportunity just as long as the salary is in yen.

    August 13, 2010 at 2:16 am |
  4. Analin

    omg..poor those who get paid in dollar. will their salary increase in this situation?

    August 13, 2010 at 2:21 am |
  5. Kenny

    @ Borabora86 I hate you.

    August 13, 2010 at 2:34 am |
  6. William Brennen

    In 1958 the Yen was 360 to the US dollar. It is hard to believe that the dollar will buy so little in 2010.

    August 13, 2010 at 2:56 am |
  7. Andrew

    I appreciate whale's comments on how the US budget is driving effects overseas, however a single world currency won't solve the problem. This can't happen without a single world bank, which would require a single world political unity. Just look at Greece, Spain and the rest under the Euro. The best thing that the Dollar has going for it is that it has a large, politically unified base of states to support it's monetary policy and "they're all in it together".

    We are a long way globally from getting there and there's no reason to assume that we should be there now. In a capital-driven global economy, the valuation or devaluation of a currency is a crucial lubricant that makes the global system work, and granted there are losers and winers in the struggle but that doesn't mean that the system is flawed!!!

    August 13, 2010 at 3:04 am |
  8. Vendo Thefastlane

    For those of us paid in yen but still holding debts in dollars, this is very positive. It's also a good time to pay for upcoming international travel, etc.

    August 13, 2010 at 3:23 am |
  9. Bob387

    For a country dealing with deflation the strong yen is not good news, prices in Japan will continue to fall, depressing investment and hiring. The strengthening of the yen would be good news in about 10 years when massive numbers of Japanese start retiring and thus needs for domestic jobs aren't as strong, but right now its a killer.

    August 13, 2010 at 3:24 am |
  10. Nikki

    I agree 100% with Andrew. There is no placement for the USD as a global currency any time soon!

    August 13, 2010 at 3:27 am |
  11. Carl

    As an American ex-pat living in Japan for over 25 years, I have seen the dollar going from about 260 Yen to the dollar to the present 85 Yen to the dollar. This is easy for anyone getting paid in U.S. dollars here and it causes people (those visiting from overseas or being paid in dollars) to make serious serious restrictions in their spending, but it is a great boom for those going overseas from Japan for whatever reason. It is something that was the reverse many years ago and I guess it could be said it is just a sign of changing economic times.

    The almighty dollar in is now discovered to be "almighty" in a finite manner. World economies are changing and the economic scenery is changing although there are many who choose to not recognize this and believe the U.S. will always be the leader in world economies. While it may be debatably wiser to have the American economy lead the way in this world, there are forces at work that beg to differ.

    Perhaps a bigger thing to concern us should be the shifting influences that will take affect as the world economic powers shift and therefore influencing political spheres as well. I believe that we will see some major changes in the way regions are going to be influenced politically by countries that are becoming stronger economically...just watch! Whether for better or worse, it may very likely happen-maybe even sooner than we think. I just hope humanity can learn to adapt and not wind up trying to kill each other for the sake of greed and economical power hunger...

    August 13, 2010 at 4:10 am |
  12. dilshan

    it all refelects the downward trend of USA , fighting in Afgan, Iraq , & etc .. leaving lot of threats on open, then wall street going for a six.... & Wilki is about send anohter Bomb ... what strategy will USAformulate to over come all of these ... hope it will not be Hide & seek ,,,,,,!!!!

    August 13, 2010 at 6:31 am |
  13. Sandra Wilcox

    Interesting reading – having lived in Korea and seen some fluctuations... here's what i think. I agree with Andrew and Bob. Japan is in a tough spot with the strong yen meaning exports are not attractive. In addition it has an aging population and one of the lowest birth rates in the world. they also discourage immigration. consequently they have an aging population and few worker- aged population. This is impacting their growth and will continue to do so for some time... hence the deflation. while the Asian economies are starting to grow – they do not have big enough middle class consumers yet – so everyone continues to sell to the US – the biggest market.. and we're going for the lowest prices (therefore not interested in Japanese products!). We also have lots of immigrants that help our economy grow. So if English teachers are discouraged in Japan – I'd recommend you consider Korea – their economy is more on par with the dollar (though it too fluctuates but not as bad as Japan) – and there are lots of teaching opportunities!

    August 13, 2010 at 7:39 am |
  14. Robert

    The "value" of a dollar relative to a yen is really a parameter of secondary importance. If the US dollar falls to 50% of its former value, but the average wage in $ doubles, the result is zero change to standard of living. The parameter of interest for an individual is the POWER PURCHASING PARITY of his/her income.

    Now, as for why a falling currency might be bad, it comes back to deficit spending. As the US government prints money to service its debt, the value of our dollars go down. This is the "inflation tax" on our net monetary wealth needed to fund public services we didn't pay for. And the inflation tax is highly regressive because while the rich can lock up their wealth in assets like real estate and stocks that are relatively immune to inflation to first order, the poor can generally hold only paper money.

    August 13, 2010 at 5:02 pm |
  15. Jay Suber

    I feel your pain. There is also an upside to a weaker dollar. It makes our exports from the homeland (USA) more attractive. A strong dollar has the reciprocal effect. Our problem (USA) is the imported oil commodity in my opinion, that has our trade balance out of wack. And, our financial sector is less tied to the real sector (goods and services). We make (manufacture) far less for the average consumer abroad. I wonder and I am being very curious here–What products made in America do you buy on a daily, monthly or yearly basis?
    The exchange rate is truly an interesting system. Again I feel your pain, even state-side - having to stretch the almighty dollar to make ends meet.

    August 14, 2010 at 5:30 pm |
  16. Kelly Miyashita

    This trend is caused by a shift in money management strategies by countries such as China, which are shifting from U.S. Treasuries to Japanese GB's. Its a flight to perceived safety, although why they think Japan is safer is somewhat of a mystery. The demand for yen-denominated investments is pushing up the currency. This trend will continue for awhile. Oddly, during times of a strong currency, you would think that Japanese money managers would be taking advantage of distressed investments in the United States and abroad in general. If you believe your investments will increase in value, plus the yen will weaken in the 3 to 5 year horizon, you are looking at a very lucrative set of circumstances. But we are not seeing this. Instead, the Japanese are still focused on poor or weak performing assets at home. So while some things change, many things remain the same.

    August 17, 2010 at 5:18 am |
  17. Wylie

    I hope you don't think it is restricted to Japan. Europe is equally a bad place to be. It has eased since the PIGS have had problems and you never know what the rate will be next month. Add to that, the banks are now charging for exchanging your dollars even if you have to wait a month for the funds to become available.

    August 18, 2010 at 11:36 am |
  18. Anthony Chung

    I think is selling more books than ever before.
    For me books are 10% cheaper relative to the Indonesian rupiah.

    August 21, 2010 at 11:13 pm |
  19. Jason Driscoll

    Spare some thought for "us" Aussies, the 2000 Sydney Olympics saw our "Dollarette" drop to 48c, then in 2008, the Aussie "parity' party was planned when the little "Aussie Battler' got up to 98USc! Now is bobbing around the 90USc mark. It make a bottle of Aussie wine vary considerly in value over a year doesnt it!

    August 31, 2010 at 5:05 am |
  20. Mike

    As a US defense contractor living here in Japan I can relate very much to this story. I have lived here the last 20 years either in the military or in my current capacity. Never have I seen the situation worse than than it is today. I have lost 15% of my buying power from 1 year ago. Translated that means a $320 increase per month in rent alone, not to mention many other expenditures. We here, have decided that this is where life is better for us. Unfortunently, it has come to the point of not being worth what we value - near zero crime rate, friendly people and a great place to raise our children. I for one, will be looking at employment in the US. The problem is that the economy is just as bad there. Welcome to the current global economy, you can run, you can hide, but you can't escape reality - were all in the same boat without a paddle.

    September 8, 2010 at 11:40 am |
  21. Janet

    Wow, I thought we had it bad...try having your $$ so worthless you can't afford to drive! We're in Germany, and choking we get increases...HAIL NO.....I would like to say that in my limited opinion the whole EU think created quite a trickle effect that left our whole global worth.....less. Can't we just go back to the DM? I know the Germans would love it....Hang in there Japan...most of you own everything anyway....J

    September 9, 2010 at 10:31 am |
  22. jb

    I live in South America. In the last 18 months, I have lost 13% of my earning power from being paid in US$. US employers don't understand this - or if tey do, they don't care. The solution in my humble opinion is to do adjustments every 6 months if the currency change has gone more than "x" % in either direction.

    October 21, 2010 at 1:16 pm |

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