Odd Lots
Lots More With Brad Setser on the Yen, a New China Shock and Excavators
May 10, 2024
Brad Setser, a senior fellow at the Council on Foreign Relations, dives into the intriguing dynamics of currency markets and global trade. He discusses the falling Japanese yen and the factors behind its weakness, including interest rates and economic policies. Setser also explores how a weakening yuan is boosting China's exports, hinting at a potential new "China Shock." Additionally, he examines the significance of China's excavator exports as a reflection of its economic health and the complexities of U.S.-China financial interdependence.
29:18
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Quick takeaways
- The weakening Japanese yen due to low interest rates raises concerns about purchasing power and global competitiveness.
- China's export surge in electric vehicles and clean energy products poses a potential 'China shock' in the global economy.
Deep dives
Yen Weakness and Japanese Economy
The yen has been weakening significantly due to low Japanese interest rates compared to US and European rates. This has led to concerns about Japan's economy's purchasing power relative to its historical strength. The Bank of Japan's efforts to boost inflation are at odds with the Fed and ECB policies, complicating the situation. There is debate on whether the yen's weakness is due to interest rate differentials or if it has overshot its actual value.
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