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Posts Tagged ‘Japan’

Tight labour market in Japan but wages stagnant.

May 11, 2017 Leave a comment

As is mentioned in simple economic theory, when you have a good or service that becomes more scarce there is an increase in the value of that good or service. The labour market in Japan is becoming very tight in that the supply of labour is starting to decrease with the demand increasing – see graph. This should ultimately lead to higher wage demands by workers as they are becoming more and more scarce relative to the demand. Recent figures out of Japan show this situation:

Japan labour market* Working age population – 15-64 years in Japan – fallen by 3.8m since December 2012 = decrease in supply of labour = upward pressure on wages
* People actually working has increased by 2.2m = increase in demand for labour = upward pressure on wages
* Unemployment in Japan = 2.8% the lowest rate since 1994 = upward pressure on wages

Why has there been no increase in Japanese wages?

Japanese labour unions have not been very aggressive in wage bargaining and there was a wage increase of only 0.2% in 2016 but already in negative territory this year – see chart. Wages have remained stagnant as strong demand has resulted in an increase in supply of labour rather than the price of labour – wages.

Japan - wage growth
Supply of labour increase:
* Japan now has 1 million foreign workers as compared to 680,000 in 2012
* Numbers of elderly men and women in the workforce has increased by over 2 million
* There is a rising share of part-time work

Job security at the expenses of wage increases.
It seems that market forces don’t really affect those employed in large firms. The pay in these firms has been largely unresponsive to the pressure of supply and demand as employees of life-time employment do not worry about being made redundant but don’t expect significant pay rises during the good times. However in times of inflation they do request higher pay to offset the increased cost of living.

So if general workers pay does increase there is the possibility of the general level of prices will also go up which would in turn increases the wage demands of those in large firms. However as stated by The Economist

“Japan’s workers are hugely in demand but strangely undemanding.”

Categories: Labour Market, Unemployment Tags: ,

Options for taking on Trump – the Japanese Model.

February 7, 2017 Leave a comment

trump-abeA colleague alerted me to a Terrie Lloyd a New Zealand businessman in Japan who writes a weekly newsletter. With the election of Donald Trump his recent writing looked at bullies and ways in which you deal with them. Shinzo Abe, the Japanese prime minister, has been proactive in getting to know Trump and his team and how the two countries can work together.

Research on bullies

Lloyd suggests that there are generally three ways to deal with a bully.

Run – UK seem to be taking this option
Fight – Chinese will do this
Suffer and appease – Japan, having a bullying culture already, will go for appeasement

Abe will be meeting with Trump on 10th February for a second time in as many months and will want to convince him that Japan is one of the good guys and if he has to pick on someone in the area he should pick on China. For this to work Abe also needs to feed Trump’s ego publicly

Lloyd looks at the work of Dacher Keltner who has written about appeasement and related
human emotion and social practice. He looks at two general classes of appeasement.

1) reactive – the person provides appropriate responses after incidents and these responses are usually public displays of embarrassment and shame.
2) anticipatory appeasement where a person is proactive and engages in certain strategies to avoid conflict. Polite modesty and shyness are also considered anticipatory appeasement.

Japanese Model for dealing with bullies

With Japan taking the latter option, Keltner is suggesting that Abe must appease Trump with gifts of value and that they are seen publicly to assist Trumps power and reputation. Last month the Japanese gave access to US car manufacturers but will that be enough to keep Trump happy? At the meeting on 10th February Abe will propose a package that could generate 700,000 U.S. jobs and help create a $450-billion market. It includes the building of infrastructure projects such as high-speed trains in the northeastern United States, and the states of Texas and California, and renovating subway and train cars. It also includes cooperation in global infrastructure investment, joint development of robots and artificial intelligence, and cooperation in cybersecurity and space exploration, among others.

Toyota the car manufacturer has also been taking the appeasement option after the Trump administration criticised their building of a second car assembly plant in Mexico and also threatened to impose a 20% tariff on Japanese automobile and auto parts makers with plants in Mexico. Toyota quickly announced it would invest $10 billion in its U.S. operations over the next five years.

Abe has definitely been massaging the ego of Trump not only being the first international leader to visit Washington after his election but also telling Trump that he “hopes the United States will become a greater country through (your) leadership,” adding Japan wants to “fulfill our role as your ally.” It will be interesting to see what happens after their meeting on Friday 10th February.

Sources: Terrie Lloyd,  The Japan Times

Bank of Japan sits on its hands

May 15, 2016 Leave a comment

Central Bank Rates 6th May 2016Been teaching a lot on the problems that economies have in trying to stimulate more growth to get out of the deflationary threat that is prevalent in many countries. Central Banks around the world running are out of ammunition (cutting interest rates – see rates below) and one wonders what is the next step that economies can take?

Back in February the Bank of Japan (BOJ) pushed interest rates into negative territory with the uncollateralised overnight rate being -0.10%. After saying that it would do everything in its power to get inflation to reach 2% (its target rate) and with inflation expectations moving down from 0.8% to 0.5%, markets were very surprised that it didn’t ease rates further. Two of Japan’s measures of inflation are moving away from the the target rate of 2% – see graph below.

Japan inflation 2016

With this decision the Yen strengthened and it is becoming exceedingly difficult to tell if a central bank has run out of ammunition especially when it doesn’t fire a shot. So why have the BOJ held off on easing?

  1. When rates are cut – especially if they go negative – it takes six to twelve months to judge its impact on the economy. This is something referred to as the ‘Pipeline Effect’.
  2. Governor Haruhiko Kuroka may be concerned with the strengthening of the Yen after the last cut in February. This makes exports more expensive and imports cheaper.
  3. The Governor is waiting for the government fiscal stimulus to kick in with the impending cancellation of an increase in value-added-tax.

There is plenty of room to push interest rates further into negative territory and with the next scheduled BOJ meeting in June they will be watching what the US Fed reserve do. An increase in the US Fed rate will mean a stronger US dollar which might achieve more for Japan than further negative interest rates.

Credit Rating Agencies – how countries stack up.

March 8, 2013 Leave a comment

Rating Agencies Feb 2013Here is a list of the latest ratings by the three main rating agencies. Notice that Australia and the three Scandinavian countries have top ratings. The UK lost its top rating from Moody’s but maintained the top rating from the other two. New Zealand comes in further down with a top rating from Moody’s but has lost its top grade from the other two. When you get to B status your are talking high risk or junk status and this is quite evident with the PIGS counties.

If you have watched the movie documnetary ‘Inside Job’ you will remember that these 3 credit rating agencies also rated high risk investments – sub-prime mortgages – as AAA, up to a week before they failed. The same could be said about their rating of investment company Bear Stearns.

Ultimately they could have ‘stopped the party’ but delayed ratings reports and made junk status investments AAA rated. But as they testified in front of congress their advice to clients are opinions ‘just opinions’ – I wonder do they share the opinions of those that lost huge amounts of money, including sovereign investments. Recently they downgraded Greece and Spain in the knowledge that the servicing of the debt would now become more costly for those countries and stifle any sort of recovery in the near future.

Japan’s three arrows of economic policy

February 5, 2013 Leave a comment

Japan’s Prime Minister Shinzo Abe recently addressed parliament stating that he plans to reverse the trend of issuing bonds to raise money but raise more in taxes. Japan cannot beat deflation and a strong currency (yen) if it adheres to the same policy of the past decade.

However his speech comes after the announcement of a $226.5bn stimulus package earlier in the year and this when Japan already has some serious debt issues – public debt that is almost three times the size of the Japanese economy.. He also wants the Bank of Japan to maintain an open-ended policy of quantitative easing (QE) and a doubling of the inflation target – 2%. Hopefully the fiscal stimulus package accompanied by more QE will drive down the price of the yen which will make Japanese exports more competitive. He stated his three arrows of economic policy:

1. Aggressive Monetary Easing
2. Flexible fiscal spending
3. A growth strategy that would induce private investment

Who knows if it will work but Shinzo Abe stated that it is worth the gamble.

China Inequality – new figures released

January 30, 2013 Leave a comment

Here is a recent chart from The Economist. This is the first data on inequality to come out of China for 12 years – remember 0=perfect equality and 1=perfect inequality (all the income is earned by one person). It seems that poorer countries like South Africa, Nigeria and Brazil have benefitted from growth over the last few years but it hasn’t trickled down to lower income groups. As well as being better off Japan and Sweden seems to be more equal societies as opposed to India and China where most people are equally poor.

China Gini

Categories: Inequality Tags: , , ,

Japan pours more fuel on the ‘dull’ embers

November 1, 2012 Leave a comment

The New York Times recently reported that the Japanese authorities are once again trying to stimulate a rather moribund economy with injecting more money into the circular flow.

* A ¥11 trillion is to be added to an asset buying programme
* The Bank of Japan will supply banks with cheap long-term funds in the hope of stimulating borrowing.
* Base interest rate to stay at 0-0.1% – see graph below
* These measures will stay in place until inflation has reached at least 1% – Bank of Japan forecast of this figure is March 2014.

There has been some return to growth with the reconstruction after the 2011 earthquake and tsunami. However global demand has declines and the issue of territory with China hasn’t helped – Japanese goods are not being favoured by Chinese consumers. Japan’s deflationary decade hasn’t been helped with a contracting population and monetary policy needs to be accompanied by government fiscal policy as private sector companies don’t have the confidence to invest in major expansions. To this end the government have thrown money at the economy to the tune of ¥422.6 billion (in the form of government spending) but this is already twice the size of the Japanese economy. A strengthening yen hasn’t helped matters as exporters find their products uncompetitive.

Europe at risk of a Japanese style lost decade

August 17, 2012 Leave a comment

Since the start of the global financial crisis in 2008 and with the exception of Germany, none of Europe’s biggest economies have returned to the level of economic output they had in the pre GFC days. In Japan in the 1990’s there was the need for the central bank to aggressively fight deflation, and let banks take credit losses quickly, suggesting that expansionary fiscal policy did not offer a way out of low economic growth.

According to the New York Times – economic growth not realised represents investments in education that were never made, research was never financed, businesses that failed and careers that ended too early or never got off the ground.

Economists warn that the euro zone is on the same path as Japan was in the 1990’s, when failure to deal with weak banks led to a decade of stagnation. The Japanese never fixed their banks and as banks in Europe have limited cash reserves they are reluctant to take the risk of lending money. Although the ECB has supplied banks with significant amounts of cash they cannot force them to lend the money out to investors which ultimately creates growth and jobs. Below are some statistics which allude to this.

Demand for housing loans in Q1 2012

Portugal 70%↓
Italy 44%↓
Holland 42%↓
Italy – business loans 38%↓

Recessions can be beneficial as they can improve efficiency and reduce risky lending. However for the eurozone this is no normal recession in that its duration will be significantly longer than the norm. See the interview below with investor George Soros.

Categories: Euro Tags: , ,

Deflation for New Zealand Economy?

July 17, 2012 Leave a comment

The recent CPI figures published by the Dept of Statistics in Wellington show that there was a 1% in the CPI from the June 2011 quarter to the June 2012 – the lowest annual rise since 1999. This is at the bottom of the Policy Target Agreement which stipulates that the CPI should be kept between 1-3%. The question now is whether annual headline CPI inflation can avoid dipping below the bottom of the 1.0% and whether the threat of deflation is a serious concern?

Deflation – why is it a concern?

In the short-term a period of deflation can help the economy. Falling prices mean that consumers can buy more with their income and rising purchasing power would provide a boost to confidence and could assist the economy by increased growth.

However a longer period of deflation can be very damaging to an economy for two reasons:

1. Expecting prices to be lower in the future consumers put off purchasing goods and services in the expectation that they will get lower. This leads to a contraction of demand and ultimately lower growth. Japan in the 1990’s is a good example of this – see graph below.

2. A more dangerous scenario is debt deflation. As prices fall the real value (nominal – CPI) of debt increases – just as it decreases if prices are rising.

The increase in debt that people have taken on over the last 5 years makes this latter point very worrying. However, commentators have suggested that deflation shouldn’t become a problem in NZ.

Professor Bernanke v Chairman Bernanke

May 18, 2012 Leave a comment

In a recent edition of The New York Times magazine Paul Krugman wrote an article discussing the role of Ben Bernanke as an academic versus that of being the Fed Chairman.

When the financial crisis happened in 2008 it seemed that there could be no better person to be Fed Chairman. Having studied the Great Depression and written various academic papers on this and the crisis in Japan in 1990’s economists felt that Bernanke was the man for the job. Although the Fed has done a lot to rescue the financial system there is still major concerns about the labour market and the rising long-term rate of unemployment. Remember that the Fed has a dual mandate of Price Stability and Maximum Employment. In order to stimulate growth in the economy, especially when inflation is low, central banks lower interest rates but when the Fed Funds Rate reached 0 – 0.25% on the 16th December 2008 they basically ran out of ammunition as rates couldn’t go any lower. Here you tend to get stuck in what we call a “liquidity trap” in that monetary policy is no longer effective. When Japan was going through very slow growth in the 1990‘s, in which it experienced deflation, Professor Bernanke stated that Japanese policy makers should be a lot more active in trying to stimulate growth and inflation. With interest rates already at 0% he suggested that monetary authorities were not proactive enough to experiment with other policies even though they might have been radical. This all harks back to the days of FDR (Franklin D Roosevelt) in which he created work schemes, infrastructure projects etc, in order to boost employment. I have summarised Paul Krugman’s article below in a table format which shows Bernanke policies for the US economy as a Professor v Chairman.

So why hasn’t he taken on the role of the Academic Bernanke? Krugman suggests that:

this is the effect of bullies and the Fed Borg*, a combination of political intimidation and the desire to make life easy for the Fed as an institution. Whatever the mix of these motives the result is clear: faced with an economy still in desperate need of help, the Fed is unwilling to provide that help. And that, unfortunately, make the Fed part of the broader problem.

*Krugman is a keen “Star Trek” fan and compares the Federal Reserve to a Borg — a race of beings that act based on the wishes of a hive mind, and present major threats to the Starfleet and the Federation.

Central Banks give cheap loans to help global markets

December 1, 2011 Leave a comment

Central Banks worldwide have agreed to provide cheap loans in US$’s to banks in Europe and other parts of the global economy. There is obviously serious concerns about the economic climate in Europe but will it calm the markets? The truth of the matter is that more liquidity alone is not going to solve the economic problmes of the eurozone countries. The graphic below does show some positive signs with bond yields on the way down which suggests that there is less risk associated with their purchase. However there is still a long way to go for stability to return. See graphic below from the WSJ.

Central banks have offered cheaper credit before:
March 2011 – interevened to reduce the value of the Yen following the earthquake and tsunami.
October 2008 – central banks cut rates to reduce the shock on financial markets when Lehman Brothers went under.

“The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.” combined statement form the 6 central banks. These include:
-US Federal Reserve,
-Bank of Canada, the Bank of England,
-Bank of Japan,
-European Central Bank and
-Swiss National Bank.

Higher natural rate of unemployment will mean structural reforms

September 20, 2011 Leave a comment

The recent special report in The Economist looked at the altering structure of the labour market worldwide. Obviously globalisation and technology have brought big changes in the nature of work, and levels of unemployment will remain high in the developed world as developing countries see their numbers employed being boosted.

Edmund Phelps, Nobel Economist, thinks that the US natural rate of unemployment in the medium term is realistically around 7.5% which is significantly higher than a few years ago. Remember the natural rate occurs when inflation is correctly anticipated – this level of unemployment results when the economy is at full employment.

Michael Spence, another Nobel prize-winning economist, agrees that technology is hitting jobs in America and other rich countries, but argues that globalisation is the more potent factor. Some 98% of the 27m net new jobs created in America between 1990 and 2008 were in the non-tradable sector of the economy, which remains relatively untouched by globalisation, and especially in government and health care. Lowering this natural rate will require the following:

1. changing education to ensure that people enter work equipped with the sort of skills required so that there is no mismatch
2. adjusting the tax system – incentivise work
3. modernising the welfare safety net – encourage those to find work
4. encourage entrepreneurship and innovation.

This is easier said than done.

Long-Term Unemployment
This has increased dramatically in many countries – 58% in Ireland, 40% in both Spain and Japan, and 30% in the US, see graph below.

The concern with these figures is that the longer poeple are out of work the less likely there are able to find future employment. There are two reasons for this:

1. Their skills get out-dated very quickly and this is especially prevalent in the current labour market as technology is starting to takeover many procedural white-collar jobs.
2. Motivationally they find it hard to engage in the process of lookign for work and this is esepecially prevalent once a person is on a generous welfare benefit.

According to The Economist:
Long-term unemployment often turns into permanent unemployment, so governments should aim to keep people in work, even if that sometimes means continuing to pay them benefits as they work.

NZ economy strong despite Christchurch earthquake

July 16, 2011 Leave a comment

The 2011 March quarter GDP figures were quite amazing when you think of the tragic earthquake in the Christchurch area last February. The economy grew 0.8% (0.4% forecast) which signifies that the economy outside of Christchurch is very strong. If you compare the data from the other recent natural disasters, being the Queensland floods and the Tohoku earthquake/tsunami, New Zealand has actually grown – see figures and graph below:

* Australia had a 1.2% drop
* Japan had a 0.9% drop


The NZ$ and QE3

Also the NZ$ keeps motoring ahead – yesterday reaching US$0.85. However, with the official cash rate at 2.5% one wonders what is the currency reacting to? Most likely it was:

*the better than expected Q1 GDP figures outlined above and
*the words of US Fed Chairman Ben Bernanke who strongly suggested the US economy was in need of some more serious antibiotics in the guise of QE3 – Quantitative Easing 3 in which the Fed bascially print money.

Bernanke indicated that QE3 would depend on two conditions, economic weakness beyond current expectations, and a renewed threat of deflation.

The Fed is charged by Congress with minimizing unemployment, and some of its critics say that current unemployment rate of 9.2 percent should be a sufficient reason by itself for the central bank to expand its roster of economic aid programs.

Mr. Bernanke noted that the scale of the Fed’s existing efforts was unprecedented. The central bank has kept short-term interest rates near zero for more than two years. It also owns more than $2 trillion in mortgage-backed securities and government debt, the legacy of its two asset-purchase programs to reduce long-term interest rates.
New York Times

Future worry for NZ economy
These figures indicate strong underlying growth in the NZ economy but there are concerns about capacity contraints if the economy is to grow more. And if this is the case there will be significant pressure on prices and a sooner than predicted OCR increase by the RBNZ.

I am off on holiday for a week and will resume service on Monday 25th July.

BBC graphics show rise of Asia

July 3, 2011 Leave a comment

Thanks again to Richard Well for this link to the BBC site. The BBC’s Power of Asia season examines how economies in the region have changed over the past 30 years. Use the chart builder below to compare countries in terms of wealth, health, life expectancy, education and energy consumption. It is very similar to the Gapminder site but the BBC version does give some useful information below the graphs. Click here to go to the BBC site.

Categories: Inequality, Teaching visuals Tags: ,

Tohoku versus Kobe earthquake

May 17, 2011 1 comment

Many thanks to Yr 12 AS student Tomo Greer for this piece on the comparison between the recent Tohoku earthquake and that of Kobe in 1995.

Kobe in 1995 (and affected regions)
* Was responsible for 12.4% of Japan’s GDP (gross domestic product).
* Caused $120 billion in damages
* Declined to 24.4% by the end of June
* The Nikkei 225 regained its pre-quake level by mid-December 1995.
* Kobe was one of the biggest ports in Asia and a very industrial part of Japan

Tohoku in 2011
* Area not as industrialised as Kobe so only affected 7.8% of Japan’s GDP.
* Bank of Japan immediately injected $85-billion into the markets to show support
* The effect was more emotional rather than effecting the economy; the earthquake was on a bigger scale but effecting less of the industrial parts of Japan
* But many companies supply lines affected e.g. Toyota and Honda

The Kobe earthquake had little long term impact on the economy compared to the recent Tohoku earthquake, was on a bigger scale resulting in many more deaths. Long term affect still uncertain. However, as the damage is bigger in the Tohoku earthquake (because of the tsunami) even though it has not affected Japans industrial heart, it will take longer for the economy to recover. Overall it is hard to predict the long term affects as we are not able to say how the economy is going to be for the next year; considering Japan is still dealing with the nuclear radiation issue.

Nikkei stocks – affect of Tohoku and Kobe quakes

Categories: Growth Tags: ,

Interesting Phillips Curve

March 30, 2011 3 comments


I saw this on the Tutor2u blog. Remember the Phillips Curve (named after New Zealander Bill Phillips) relates the level of unemployment to the rate of change of money wage rates (which are a proxy for inflation). If you look at Japan’s Phillips Curve from January 1980 to August 2005 we get the graph to the right. You can see the trade-off between unemployment and inflation – ie high inflation low unemployment and vice-versa.

However, Gregor Smith of Queen’s University Canada, found out that if you rotate the Phillips Curve around the vertical axis so that minus unemployment is now on the horizontal axis you see a map of Japan. Who said economics is a dull science.

Will Japan’s Crises Disrupt Global Economic Recovery?

March 16, 2011 Leave a comment

Here is an interview with The Economist writer Greg Ip which was screened yesterday on the PBS Newshour.
Key points are:
* Japan is the key supplier for a lot of manufacturers – it is the world’s largest suppliers of flash memory and of semiconductors over the last few years
* Japan has virtually no natural energy resources of their own – very dependent on nuclear power
* Loss of nuclear power will increase demand for fossil fuels – with this and the unrest in the Middle East global oil prices will rise
* Japanese seem to have the funds to rebuild the economy as they are very high savers. They have bought all their government’s debt to date

Categories: Growth Tags: ,

Japan Earthquake and Gold Prices

March 14, 2011 Leave a comment

With the huge earthquake and tsunami in Japan one wasn’t surprised that there was an increase in demand for gold. Investors generally buy gold as a hedge or safe haven against any economic or political event. In this case a natural disaster. Below is the price of gold – notice the increase in price to US$1431.60 per ounce.

This event reminded me of a scene from The Corporation DVD with Carlton Brown, a commodities trader at the NYSE. He describes the tragedy of 9/11 as a blessing in disguise because for some people, it translated into great riches. Brokers celebrated the death and destruction of the Iraq war because “in devastation, there is opportunity”. An unfortunate way to look at how the market sometimes works when you consider the death and devastation in Japan.

Oil prices↓ and ¥↑?

March 12, 2011 Leave a comment

With the terrible events overnight in Japan one wonders how the Japanese economy is going to be affected. However it was interesting to notice what has happened to the Yen against the US$ and the price of oil.

The US$ dropped against the Yen – was ¥82.8 but now is ¥81.8. Reasons for this:
1. The flow of insurance pay-outs that will no doubt follow the earthquake/tsunami.
2. Companies repatriating funds as happened after the Kobe earthquake in 1995

Benchmark Brent crude oil contracts fell 1.1 per cent to $114.16. Reasons for this:
1. The closure of Japan’s refineries damped immediate demand for crude oil.
2. Considering Japan’s huge oil consumption, around 4.4 million barrels a day, investors feared the demand would fall after the disaster at least temporarily, triggering large scale of sell-offs across markets.

According to the FT in London:
Natural disasters can actually be positive for growth because governments spend to repair the damage. After the Kobe earthquake in 1995, the Nikkei fell about 8 per cent in the following five days, then recovered 5 per cent in the next two weeks.

In a broader sense this earthquake is probably the last thing that the Japanese economy needed – namely its ability to pay in order to get the country back to a growing level of economic activity. However, although Japan’s government is highly indebted its people are very wealthy and there are many ways that you can tap into this wealth.

It seems that oil prices will be downward until the damage in Japan is fully assessed. But there always remains the threat of further political turmoil (sorry about the pun) in the Middle Eastern countries.

Should RBNZ intervene in currency markets?

November 5, 2010 Leave a comment

Brian Fallow wrote an interesting piece in the NZ Hearld this week. He outlined the different policy stances by both National and Labour with regard to exchange rate intervention.

*National still maintain that intervention is not a viable option to reduce the value of the NZ$. They cite the experience of the Bank of Japan in the 1990’s and their attempt to devalue its currency – the Yen went from 330 to 80 against the US$.
*Labour favour the RBNZ intervening more actively to reduce volatility of the currency as it becomes difficult for exporters to plan ahead.

The recent QE2 by the US Fed has caused the US$ to fall against all major currencies. This with the Chinese resisting moves to allow the Yuan to appreciate faster against the US$ leads to the appreciation of everyone else’s currency. If NZ embarks on a competitive devaluation to make exports more competitive, by the RBNZ selling NZ$ on markets, there will be costs:

1. The extra dollars would be inflationary
2. The weaker NZ$ would make imports more expensive which may impact on higher input costs
3. With a weak labour market firms may pass on some of cost to their workers via lower real wages.
4. With inflationoary pressure a tightening of monetary policy might be required – higher interest rates. This will attract capital inflows and increase the value of the US$.
5. This would increase Government debt which puts pressure on the taxpayer.

However it is hard to conclude that there would be no benefits from a weaker NZ$. In 2007 the RBNZ did intervene in the foreign exchange market and sold NZ$. At present it would be hard to make the case that the NZ$ is unusually high – it is still 6% lower aginst the US$ than it was in 2007.

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