Word: yen
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...many respects, the erosion of the yen is driven by emotion rather than reality, since Japan's economy is still growing at a robust rate of about 4.5%. "It's really psychology, running in just the opposite direction of the underlying economic forces," says C. Fred Bergsten, director of Washington's Institute for International Economics. To prop up the yen, the Bank of Japan first tried intervening in foreign-exchange markets, spending $10 billion, or 17% of the country's currency reserves, to buy yen and dump dollars. Since that proved futile, the central bank last week boosted...
Besides seeking to buttress the yen, the Bank of Japan was trying to prevent an outbreak of inflation. Consumer prices are rising at a relatively modest 3% annual rate, but the official index fails to provide an accurate measure of many worrisome signs. Residential land prices in the booming city of Osaka rose 56% last year. So far in 1990, hotel rates have risen 9%, and the price of a bottle of Kirin beer is up 6.7%. Petroleum prices also rose last year, no small matter for a country that imports nearly...
That message was driven home last week, when the Tokyo stock exchange was forced to acknowledge a loss of prestige as well as profit. Because of falling share prices and the softening yen, the exchange has yielded its huge lead as the most valuable stock market in the world. As measured in terms of total market capitalization, the Tokyo exchange is now worth about $2.9 trillion. That means it has been chopped down to Wall Street's size...
...meantime, the Tokyo market may be in for a few more rounds of volatility. Most forecasters expect the market to fall even further. No matter where the yen and the Nikkei finally settle, the recent churning in Tokyo's financial markets suggests that Japan is a less independent -- and probably less dominant -- economic power than it had been considered...
...faltering yen and a plunging Tokyo stock market threaten to choke the country's economy and sap its confidence. -- Brazil learns to live without cash...