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Rogers, Schiff: Don't Trust Yen

Japan is Creating a Perfect Storm


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Ever since the kick-off of “Abenomics” in Japan, analysts have gone back and forth on what the program might conceivably do for the country. While some are holding onto hope for the future, two of the most educated heads in the world of finance don’t feel very positive about where the yen is going.

In recent interviews on Yahoo! Finance’s Breakout, investor Jim Rogers and Euro Pacific Capital president Peter Schiff both had a host of negative things to say about the yen.

Yen NotesWhile both had their own separate reasons for distrusting the yen, each pointed to the overprinting of money as a major contributing factor to a falsely inflated economy.

As far as Jim Rogers is concerned, the “Abenomics” program hasn’t been anywhere near as successful as the Japanese government is purporting, pointing to the fact that the currency has fallen 27% in value in a very short period of time.

“It’s a very, very dangerous move,” says Rogers. “I know the government is reporting that [the Yen’s] move is good, but I don’t trust governments. I don’t trust our government, their government, or anybody else. Their government is as good at lying as ours is.”

Rogers believes that the weakening yen will put a great deal of strain on Japanese residents, as well as small business owners. Since inflation will cause basic necessities to rise in price, the Japanese will have no choice but to shell out more yen on a daily basis if the program persists in such a way.

"The Japanese will suffer,” says Rogers, “but stockbrokers will do better, currency traders will do better.”

Schiff’s Views

Like Jim Rogers, Peter Schiff also holds a poor views of the yen. He predicts that Japan will find itself in a crisis situation soon if things continue to move in this direction. 

Schiff, like Rogers, believes that Japan is only hurting its citizens with its current stimulus program. "I think you're about to see a big dose of consumer price increases in Japan based on a weakening and that's not going to be good news for the Japanese economy or the Japanese consumer," says Schiff. 

Schiff puts quite a bit of weight on the fact that the yen has weakened recently against the dollar. As of right now, the dollar has surpassed 100 yen, sitting at 102. At the beginning of April, however, a dollar could be had for 93 yen.

This bodes well for Americans looking to import products from Japan, but it hurts exports, making them more expensive.

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The Growing Situation in Japan

It’s understandable, when taking the details of the “Abenomics” program into consideration, why the Japanese government might feel as if it could work. After all, Japanese exporters are currently enjoying a boom of success thanks to the program, as it is allowing them to export goods to America and other countries without having to spend as much as they did in the past. At face value, it might even appear as if the stimulus truly has been successful. 

What people haven’t seen as of yet, however, are the by-products of the stimulus, which are likely to start showing up soon. 

Rising prices in Japan will make it harder for working-class families to get by, and higher utility costs could cause some small businesses to run into problems. The program, then, will inadvertently hurt Japan, even if certain parties might benefit.

Money printing is an issue that has been occurring not only in Japan, but in central banks the world over. There are plenty of different opinions to be had on the subject, but as it becomes more and more common, it’s likely the side-effects of such practices will soon begin to rear their ugly heads, and Japan may be one of the first countries in the world to see the damage.

For Rogers and Schiff, it’s a “perfect storm” type scenario that could lead to utter disaster if something is not done. While some remain hopeful, there’s no getting around the fact that there is anxiety in the air surrounding the future of Japan’s economy, and the next 6-12 months will surely be interesting to watch.

 

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