[PEN-L:4293] Re: "Japan stares down Uncle Sam's 'Big Three'" [fwd]

[Brad De Long <delong@xxxxxxxxxxxxxxxxx>]

>http://www.afr.com.au/content/990308/world/wtokyo.html
>
>"Kenichi Ohmae . . . believes Japan is being
>'micro-managed' by the United States.
>
>"In particular, he says it is being run by the 'Committee of
>Three' - Federal Treasury heads Robert Rubin and Larry
>Summers and Federal Reserve chairman Alan
>Greenspan.
>
>"Their motives, according to Ohmae, are not so much to
>keep Japan under the thumb as to provide a constant diet
>of alternative resuscitation measures - such as quantitative
>easing in monetary policy - so Japan won't be tempted to
>do what it actually needs to do to revitalise: liquidate
>assets, including holdings of US treasury bonds."


Hmmm. Liquidating U.S. Treasury bonds means that the price of Treasury
bonds and other denominated assets relative to yen assets falls, which
means that the yen rises, which means that U.S. demand for Japanese
products falls.

This means that (with the U.S. no longer serving as the importer of last
resort) Japan falls deeper into recession.

Am I missing something? What's the alternative theory by which raising your
exchange rate expands your economy?


Brad DeLong