Monday, March 22, 2004

Tokyo stocks opened sharply lower Tuesday taking a cue from Wall Street's decline amid terrorism fears. The dollar also traded lower against the Japanese yen.

The Nikkei Stock Average of 225 issues was off 117.68 points, or 1.04 percent, at 11,220.83 points at the open. On Monday, the index lost 100 points, or 0.88 percent.

The dollar was quoted at 106.79 yen on the Tokyo foreign exchange market at 9 a.m. Tuesday, down 0.17 yen from late Monday in Tokyo and slightly below the 106.80 yen it bought in New York later that day.

On the stock market, the benchmark Nikkei opened lower with shares trading lower across the board after U.S. stocks plummeted. Investors grew increasingly worried about terrorism Monday after Israeli troops killed the leader of the Palestinian group Hamas.

It looks like Bush will get his wish. The dollar is falling, making it cheaper for Japanese consumers to buy American goods and more expensive for Amerincans to buy Japanese goods. You have to be careful what you wish for though. When the dollar starts falling, the tendency to think of the dollar as the ultimate safe currency may dissipate. Some commentators seem to avoid the obvious - is the dollar falling as investors begin to sell dollar denominated assets along with their dollars?

There was no soft landing after the tech bubble popped. Can there be after this one? If the dollar is really overvalued, it might be better to think hard about the causes than take the easiest course. Making the dollar go down is a very comfortable economic policy which can be accomplished by spending and cutting taxes sometimes. I hope the short term attractions of these has not been rationalized into economic policy in the months preceeding the election.

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