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Monetary inflation affects Japanese economy and imports

People walk in front of an electronic board showing the numbers of world stock markets, including the closing numbers on the Tokyo Stock Exchange (top-C) in Tokyo on August 15, 2022. (AFP)
People walk in front of an electronic board showing the numbers of world stock markets, including the closing numbers on the Tokyo Stock Exchange (top-C) in Tokyo on August 15, 2022. (AFP)
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17 Aug 2022 08:08:41 GMT9
17 Aug 2022 08:08:41 GMT9

Nader Sammouri

OSAKA: In March, the yen was pounded approximately 7% lower, dropping towards 125.10 versus the dollar on March 28, and 132.2 on March 29. It has lost ground against the dollar, and the euro, and deteriorated against resource-rich-nations currencies like Brazil and Australia, posing a decline in purchasing power, and generally, a big problem for the Japanese economy.

Between the war in Ukraine, the financial crisis in Lebanon and Syria, and the rapid fluctuations of currencies, how should people look at money today, and what should they be cautious about?

“The political situation demands that we be more financially resilient. I think political regulators should be more focused on the rate of unemployment and inflation. Central Banks should keep the currency’s value at the same equilibrium point,” said Hana Badawi, a Jordanian financial advisor who is well-experienced in the banking industry.

Inflation occurs when the prices of goods and services escalate due to upsurges in production costs, which include raw materials and worker’s wages. Whether a product is an essential “need” or a desired “want,” high demand for certain products is another contributing reason. Inflation should be supervised and battled by central banks and should set up a target for inflation that must not exceed 2%.

With the arbitrary inflation and surging prices occurring in Lebanon, for instance, local citizens are beginning to lose faith in their banks and institutions.

“After this severe crisis, I would advise Lebanese people to save their money in international insurance companies, buy gold, and never trust the banking sector in Lebanon, said Khaled Chidiak, a financial advisor based in Lebanon.

Since 2019’s fall, Lebanon has been gliding down an economic crisis, hyperinflation, continuously plummeting to new lows. The locally-made bag of flatbread, for instance, the most essential item in a Lebanese household, used to be purchased for 1,500 L.L. (Lebanese Lira), is now sold for 12,000 Liras. Similarly, the absurd hyperinflation caused similar upsurging prices for the rest of the market’s products. It also introduced a subjective value on pricing, a skewed evaluation, as the value of any purchased item is contingent on whom you ask, and no longer mutually agreed upon in dealings.

Oil prices have been changing theatrically since 2016, when crude oil was around $30-50 for a barrel. Today, it stands at a price of over $100 a barrel after the war in Ukraine.

“Instability caused by COVID and the war in Ukraine is driving more inflation worldwide. The rapid worldly changes have a direct effect on the currency. I believe that cryptocurrency could be a global solution to controlling inflation,” said Chidiak.

“I do think,” Badawi added, “that traditional currencies will have no place in markets, and I do see digital currencies replacing the latter. The rapid technological advancements and the efficiency in their operations leave us with no choice. However, I believe that rather than using means like Bitcoin, Ethereum, and such, worldwide central banks would issue formal digital currencies for their countries.”

If a national currency diminished in value compared to other currencies, it would need more of that currency to pay for imported goods; thus a relative rise in import prices would occur, making foreign goods more expensive in that country. Many consumers, as a result, switch to buying local products.

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