But we're seeing signs of a familiar squabble starting up in the Far East, and it all concerns the strength of the currency. Japan has the same problems as SA: its exported goods become more expensive (and less profitable) on global markets every time the dollar weakens. Never mind that Japan's exports are cars and computers and ours are lumps of rock - the impact of a strong yen or rand is devastating on an economy.
On Friday rumours swirled that the Bank of Japan may intervene in the markets by buying dollars or selling yen. The country's finance minister, Hirohisa Fujii, said he was "extremely nervous" about the movements in the yen and that the "market had moved too far in one direction". He added: "Monetary policy is like the lifeblood of the economy, so I want the Bank of Japan to respond appropriately."
SA's ruling party elite haven't yet come out with such an explicit statement, but they've certainly allowed their partners in the ANC Youth League and Cosatu to voice identical sentiments - in essence, calling for intervention to lower the traded value of the rand.
Our left wing surely noted the news that the Swiss National Bank this week intervened to buy dollars to prevent the export-sapping appreciation of the Swiss franc. According to a Reuters report, the tactic worked. By Friday the dollar had moved back above parity, trading 0.9% higher at 1.0118 Swiss francs.
But back to Japan. Last week the Bank of Japan kept interest rates near zero but made no move to protect the yen. Jaws dropped when Shizuka Kamei, the minister for financial services, quipped that the Bank of Japan was "asleep at the wheel as usual". It's too much to ask that finance minister Pravin Gordhan would ever accuse Reserve Bank governor Gill Marcus of such lax behaviour, but it isn't a stretch to imagine Julius Malema or Zwelinzima Vavi doing so.
Tensions are running high between the fiscal doves and the monetary hawks. The governments of Japan and SA are crying out for stimulus - yet the sado-monetarists in charge of policy are sticking obstinately to their guns.
Several readers of last week's Bull's Eye made the point that a weaker currency would not necessarily translate into a healthier economy. However, the greater point is that a struggling economy - Japan, SA or any other - needs a visibly strong hand in the engine room.
Asian Development Bank president Haruhiko Kuroda has reiterated that emerging economies may not benefit from having free-floating currencies: "Many emerging economy currency markets are thin, shallow, and subject to large fluctuations if left completely free. So some sort of management is necessary and appropriate."
A decisive move to make the rand competitive would, over the course of our economic cycle, turn SA's trade and current account deficits positive. From that position of strength, our mines, industry, tax czars and spending authorities could at least make a fist of it.
Loading...
Be the first to comment