Yen heading for a fall?

Japan has been attracting all kind of negative news lately. The "unbelievable" contraction in its economy which contracted at its quickest pace in 35 years , resignation of its Finance Minister Shoichi Nakagawa who was allegedly intoxicated during a G7 Press Conference in Rome, the recent big drop in the approval ratings of its PM Taro Aso's and Clinton's visit to Japan which include a courtesy call to Japan's opposition party leaders are some of the recent "lowlights" for the country. Also, in recent times, there have been calls for the Japanese government to intervene in the money market to slow down the Yen's appreciation. A strong Yen will eventually kills the Japanese economy(or has it not already) and have repercussion to world trade. Here are some of the current views from analysts on this subject:

The Yen needs to depreciate

SeekingAlpha.com: An excessively strong Yen goes against the interest of everybody except those who have longed Yen......

It is frustrating for me to observe Japanese officials trying to bolster the stock market but doing nothing to avert the senseless appreciation of the Yen. At such levels, almost every manufacturing concern in Japan would fail. Artificially supporting stock prices would not work! But the Bank of Japan can sell Yen; indeed it can sell as much Yen as the market wants. There is no worry this will create excess liquidity, because should the Yen depreciate excessively, and at any sign of inflation, the central bank can mop up the excess Yen just as easily as it had sold the Yen in the first place.

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The excessively strong Yen is not helping other countries to export to Japan at all, because when unemployment and bankruptcies are on the rise, Japan's imports can only go down. In part because Japan's share in world trade is shrinking fast, world trade is also shrinking fast, hurting everybody. Order needs to be restored to the foreign exchange market before the world's second largest economy can have any chance of recovering

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The yen is heading for a fall

FT:Com: The yen is overvalued and its status as a “safe haven” currency is likely to come under scrutiny, says Michael Metcalfe, head of global macro strategy at State Street Global Markets.

He argues that analysts typically fall back on either current account positions or, better still, net foreign asset positions as a guide to which currencies should perform in times of heightened risk aversion. “The rationale is that investors respond to reduced risk appetite by cutting their exposure to international investments,” Mr Metcalfe says.

This theory appears to be supported by the fact that Japan has one of the largest surpluses on its net foreign asset position – and therefore the biggest potential for repatriation flows – and the yen has appreciated strongly.

Getting the Yen Back to Previous Levels Could Help Ease Current Pressures

SeekingAlpha.com: The two currencies causing problems for the world’s reflationary efforts just now are the yen and the dollar. Both are too strong. Equally, the yen and the dollar this decade have played key, global roles in the extension of credit via their structural weakness. While I’m not making a case for resurrection of conditions that got the world into its current mess, it’s certainly true that the global policy response is an attempt at stabilization. Getting the yen back towards its previous carry-levels would do a lot, right now, to ease pressures.

Here are two possibilities. One, the dollar is devalued against gold. Second, Japan essentially lends yen interest free to the IMF, which forms the backing of a large expansion of its balance sheet of SDRs. Those SDRs are then used to recapitalize banking systems from Austria, to Ireland. The result of these two actions is that the brunt of the dollar devaluation is borne in part by gold, to ease the race-to-the-bottom effect on other currencies. In the case of the yen, weakness does get restored against most foreign currencies, but, Europe is willing to pay that price as a recipient of IMF recapitalization.

These are of course elaborate and sophisticated methods to accomplish something simple: Money Printing. Global devaluation of paper currencies, reflation, and rescue of banking systems. Those are the goals. The world will be no richer for it.

* Ovarian cancer and talcum powder.

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* Report On Yuan Depreciation Remark False

* Bloomberg: GM, Chrysler seeks up to USD21.1B in first aid, plan to cut 50,000 jobs.

* East Europe faces deep recession.

* FT.com: Gold went to a 7 month high of USD972.65 a troy ounce after Russia's central bank planned to increase gold holdings with its overall foreign exchange reserves.