This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

G7 Gives Bank of Japan Stimulus the Green Light

NEW YORK ( TheStreet) -- The G7 meeting on May 11 produced some favorable results for the Bank of Japan, with the final statements essentially suggesting that the group's finance ministers will not openly criticize recent policy moves to weaken the yen.

As part of the Bank of Japan's historic stimulus program, currency devaluation is viewed as an important precursor to building a sustainable recovery in Japan's export-driven economy. At this month's meeting, the G7 reiterated its comments from February, which showed no intention to "target exchange rates."

This opens the door for the Bank of Japan to continue adding to its easing program if current measures fail to generate inflationary pressures and promote visible growth in Japan. Moves in the currency markets are starting to gain wider attention, however, as the USD/JPY has seen forceful moves through the central psychological level at 100. This is the first time the USD/JPY has traded at these levels since 2009, with the yen dropping more than 15% against the dollar (and 13% against the euro) year-to-date.

Focusing on Banking Rules

The May G7 meeting comes at a time when the global economy is showing a sluggish pace of recovery and clear growth imbalances are present in certain areas of the world. This week's retail sales numbers in the U.S. showed declines for the second consecutive month, and the next round of GDP data out of the eurozone indicated recessionary conditions for the first quarter.

Given the weakness in the broader economic environment, it is not surprising to see concern that Japan is artificially guiding its currency values in order to engineer a recovery fueled by exports. This is especially true when that recovery might come at the expense of other nations.


At this stage, true progress in the global growth story cannot be seen as a given, so it is somewhat surprising to see the G7 to avoid the topic of currency manipulation altogether. When we look at the comments made by representatives from each member nation, the focus is being placed on restructuring lending rules to prevent banks from becoming "too big to fail." The central goal is to shut down major lenders before they fail, in order to maintain a stronger semblance of financial stability and avoid excessive volatility in asset markets.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
YCL $52.41 0.00%
HMC $34.59 0.00%
FXY $78.33 0.00%
SNE $31.18 0.00%
YCS $94.88 0.00%

Markets

DOW 18,126.12 -36.87 -0.20%
S&P 500 2,120.79 -2.69 -0.13%
NASDAQ 5,097.9760 -8.6170 -0.17%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs