Interesting article in The Wall Street Journal about the growing power of the Yen and the Japanese policy surrounding it.

This article, posted on September 28th, 2009 discusses the rise in the Japanese yen against the dollar the previous Friday, the 25th. The yen is now about 30% stronger the its pre-crisis level, with the dollar trading at around 88.73 yen. The article goes on to say that Japan's new government under PM Yukio Hatoyama chooses not to intervene by buying dollars in order to keep the yen weak. A rising yen will inevitably hurt Japanese exports, making them more expensive abroad.

On the flip side, and as the Japanese government is arguing, a stronger yen makes imports less expensive and would encourage more consumer spending. A lot of which hasn't been happening in Japan since the 80s. A lesser dependence on exports for economic growth will help keep the Japanese economy more stable in future recessions.

Finance Minister Hirohisa Fuji rallied for the strong yen policy at the G-20 meeting saying, "I don't think it is proper for the government to intervene in the markets arbitrarily."

Positive signs of the strong yen policy are already apparent in the promotion of foreign goods in many stores throughout the country. Negatively effected are is the auto industry, which relies heavily on exports.

In the past few weeks many articles have been written on the danger of the rising power of the yen. Many economists agree that the growing strength of the yen will siginificantly hurt the Japanese export-based economy, as well as much of the rest of Eastern Asia. Prevailing opinions are that Japan must adopt rigorous structural reforms at home, such as privatization of the postal service, etc. in order to wean Japan off its dependence on exports.

Greatest Challenge Facing the Leading Actors in International Political Economy Today

It seems to me that there are many challenges facing the leading actors in the international political economy in the twenty-first century. Moreover, it seems that most of these challenges are political. I think the most predominant challenge is environmentalism, primarily anti-growth policies driven by environmentalists.

In the twenty-first century, environmentalist policy has been the driving force behind unnecessary restrictions on GDP growth in both developed and developing countries. Until recently, the World Health Organization (WHO) had in place a ban on DDT. Its use was discouraged in Africa, where it served as the most effective anti-mosquito, anti-malaria pesticide. As a result millions of people, especially children have died from mosquito-carried diseases.

The environmentalist agenda, to protect nature at any cost, becomes the most detrimental element in a successful international political economy. For example, many proposals for cap and trade will increase the cost of energy and restrict the use of some of the most efficient fuels available. Instead, these proposals promote the use of far more expensive alternatives that require government subsidies in order to compete in the market. Regardless of the adverse effects environmental policy has on global economies, it is still an unproven theory that human CO2 emissions are the root cause of climate change in the first place.

The Waxman-Markey energy bill, set to be debated in the Senate later this year, could potentially be the catalyst for environmentalism’s war against a growing international political economy. It is here we find the cap and trade legislation that will suffocate business by raising the price of CO2-intensive goods and services such as gasoline, electricity and many more industrial products. The GDP would take a huge hit and job loss would soar. Above all, this bill would place environmental issues under complete federal governmental control, including the carbon permit process. And as we all know, more governmental control equals bad business.

On a global scale, these same environmental policies are not being adopted by our fellow leading actors in international political economy. China and India have decided not to participate in global-warming control, thus allowing for tariffs on goods coming from these countries. Similarly, China and India might impose tariffs on our exports as well. This would inevitably hurt U.S. business and ultimately allow Washington greater power over the performance of our economy on both the domestic and global scale.

We have seen similar policy fail in the EU, where emission reductions were set much too high and the price of pollution permits has fluctuated wildly. We have also seen a similar bill defeated in Australia. Perhaps there is something to be said for the growing concern surrounding environmental policy and the international economy.