[A-List] Japan Government holdings of US Treasuries

[Michael Hudson]

Dear Bill,
    If the BoJ refuses to buy dollars, the supply and demand in global
markets will push up the yen/$ ratio. This will price exports by Toyota,
Sony etc above its competitors.
    The BoJ could ask the US for a fee -- or a yen-value guarantee -- and
the US would refuse.
    If it charges exporters 17%, there goes their profit rate, which is only
about 3%. Japanese earnings are totally dissipated in foreign-exchange
losses at present.
    The only solution is to turn to its own internal market or to Asia and
other non-$ markets. (The Europeans will join the Americans in anti-Asian
protectionism.)
    All Japan's government needs to do is let the $/yen transactions occur
in the market without intervening. That will force up the yen even more. The
public won't pay, and the exporting companies will lose the dollar-market.
    Michael


On 1/14/09 4:39 AM, "Bill Totten" <shimogamo at ashisuto.co.jp> wrote:

> Michael, I think you told me in the past that when Toyota, Panasonic,
> Sony and other Japanese corporations sell products in the USA for US
> dollars, they take the US dollars to the Bank of Japan to have them
> converted into yen.
> 
> Correct?
> 
> If so, when the value of the dollar is falling relative to the yen, as
> now, then the Bank of Japan (aka Japanese taxpayers) get stuck with the
> losses? That is, Japanese taxpayers are subsidizing exports of Japanese
> multinationals.
> 
> Correct?
> 
> If so, why can't the Bank of Japan refuse to buy those US dollars? Or
> why can't it charge a fee, such as the percentage decline in the dollar
> over the past twelve months, for buying US dollars from Japanese exporters?
> 
> For example, since the dollar has fallen seventeen percent against the
> yen over since January 2008, why cannot the Bank of Japan charge
> Japanese exporters a seventeen percent premium for converting their
> excess dollars into yen?  That is, why can't the BOJ pay the current yen
> value of 83 US dollars for each 100 US dollars Japanese exporters want
> to convert into yen. That is, why can't it force the exporters
> themselves, instead of all Japanese taxpayers, to suffer the losses of
> selling their products in declining dollars?
> 
> Thanks, Bill
> 
> 
>