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Posted on February 18, 2004. Filed under: Uncategorized |

Economist.com | Currencies: “A new study by Deutsche Bank argues that, with interest rates of zero, it costs Japan nothing to print as many yen as it needs to buy dollars, while those dollar assets then yield a positive return. When governments intervene to try to avoid a devaluation they need to sell dollars to buy their own currency, and sooner or later they run out of reserves. But in deflationary Japan there seems to be no limit to the ability of the central bank to print yen.”

Asian Central banks print their currency to buy dollars to keep the values of their currencies lower against the dollar. This is not a problem for Japan – as of yet. I wonder why they don’t just peg the value of their currencies rather than going through this charade?

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