Germany Vs Japan Currency War Heats Up

Tyler Durden's picture

Germany and Japan have a long tradition of cooperating, at least when it comes to various iterations of world war, generically in the conventional sense (and where they tend to end up on the less than winning side). Which is why it may come as a surprise to some that earlier today German politician Michael Meister launched what is now the third shot across Japan's bow in what is rapidly escalating as the most dramatic case of global currency warfare between the world's net exporters (at least legacy net exporters: thanks to Japan's recent political snafus, it has now become a net importer as it is rapidly losing the Chinese market which accounts for some 20% of its exports) which started as long ago as 2010 when it was quite clear that currency warfare is what the insolvent world can expect, before it devolves into outright protectionism, and finally regular war as Kyle Bass explained recently. To wit: “What can Japan’s competitors do?” Meister said today in a telephone interview. “Either we’re all smart and do nothing, or we follow suit and create a spiral that hurts us all.

Something tells us the "we will follow suit" is the right answer, as the only option left for the world which has no internal demand (i.e., consumer credit capacity to fund in house purchases of goods and services) and is destined to seek outside trade markets and inbound flows to generate inflation. But then again, none of this should be news, although perhaps it is to the EUR which has seen a rather rapid deterioration now that it is becoming very clear that what we have said, namely that Germany needs a weaker EUR to boost exports, is the only option for Europe.

And, as noted, he is not the first, nor the second, but the third in just one week to warn of what is coming. From Bloomberg: "Meister is the third senior German official to take issue with Abe in a week. Finance Minister Wolfgang Schaeuble attacked Japan’s “false understanding” of monetary policy in a Jan. 16 speech to the lower house, saying it will pump “excessive liquidity” into global financial markets. Bundesbank President Jens Weidmann said in a speech in Frankfurt yesterday that Abe risked “politicizing” the yen’s exchange rate."

Japan's response: Open-Yended monetization as reported last night. Certainly everyone will just sit there and watch as Japan does all it can to control an even greater portion of the export market and boost its GDP at the expense of all other trade deficit surplus nations. Certainly. This, naturally, ignores the very "GDP boosting" almost real war that Japan and China are increasingly finding themselves in.

From Bloomberg:

Prime Minister Shinzo Abe’s move to invigorate exports by pushing the yen lower against competitors is “very worrying,” said Michael Meister, a senior member of Merkel’s Christian Democratic Union who is due to meet with government officials in Japan starting on Feb. 7. Germany will probably seek support from fellow G-20 nations to urge Japan to change its course, he said.


Meister is the third senior German official to take issue with Abe in a week. Finance Minister Wolfgang Schaeuble attacked Japan’s “false understanding” of monetary policy in a Jan. 16 speech to the lower house, saying it will pump “excessive liquidity” into global financial markets. Bundesbank President Jens Weidmann said in a speech in Frankfurt yesterday that Abe risked “politicizing” the yen’s exchange rate.


German discomfort at Japan’s monetary policy occurs at a critical juncture in the health of the euro-area economy, including that of its German motor. Merkel, who is seeking a third term at federal elections this fall, may have to fall back on German exports to help bolster economic growth that the government forecasts to be just 0.4 percent this year.


Germany, Europe’s biggest economy, whose exports are forecast to grow 2.8 percent this year from 4.1 percent in 2012, will probably seek the support of fellow Group of Eight and G-20 states to persuade Japan to rethink manipulating the yen’s exchange rate, said Meister.


Aside from a potential backlash from Japan’s G-20 partners, any economic gains from the policy may be short-lived as monetary steps to reflate the economy bring higher import prices, said Meister. “The Japanese economy’s real problems are structural and beg structural remedies, not tampering with the exchange rate,” he said.


Abe, sworn in as Japan’s prime minister on Dec. 26, has called on the Bank of Japan to unleash unlimited monetary easing and accept a higher central bank inflation target to help revive the world’s third-biggest economy. The yen rallied today after the Bank of Japan said it will wait a year to begin open-ended asset purchases. The yen has declined 12 percent in the past three months, leveraging its competitiveness against its main competitors.

The market's response to what is now a loud and clear piling of German and Japanese FX currency troops? Green.

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hedgeless_horseman's picture






Germany, like Japan, are post-war pawns. Their currencies are DESIGNED to be debased, as and when needed, to achieve synchronized diving with the pound and dollar. If Germany wasn't in the Euro, its prior experience with hyper-inflation would prevent it from debasing when instructed to do so (obviously not a problem with the Nips). Both countries go along as willing pawns simply because they have been re-created post-war as export nations totally reliant on weak currencies.


The PIIGS profligate spending has ALWAYS been there, like a fat store, and can be used by the brain when needed to feed the body.


Losing a world war has consequences.

LawsofPhysics's picture

Indeed, and when the supply lines break, we will get another world war.  Didn't I just see a chart with declining rail and ocean cargo somewhere? Hedge accordingly

maxmad's picture

It is going to come down to who can print more and faster??? My fiat is Japan!  But don't rule out Weimar!

Bicycle Repairman's picture

Should I build a bunker for this one?

Jim in MN's picture

No, you should build one for the nuclear fallout from the projected 240,000 megawatts of reactors supposedly coming in non-OECD Asia. 

trav777's picture

maybe they will go with LFRs or the thorium reactors you ZHers keep bleating will save the world.

The world needs gigawatts and I'm not seeing a lot of options.

Currency debasement is just fighting over a shrinking pie...the pie's no longer growing.

Stock Tips Investment's picture

I think the global economic situation is creating such situations. Countries traditionally allies, seem to be preparing for a war between them. But now it seems to be a different war. Not with weapons but with economy. The aim seems to be armed with the best available policy instruments. But this war seems inevitable.

From Germany With Love's picture

What we can see on zerohedge though is a fair amount of hysteria regarding actual war between major nations. Certainly: it may or may not come to that (the future is always open) - but right now there's no signs of that in the real world.

Some people here seem to be bored and others rather losing their cool. Yes, we're living in a world with too much illusory wealth. There will need to be a dividing up of costs once losses need to get realized. And sure, this holds all the potential for conflict.

But then again you have to wonder if there isn't a fair amount of gold bugs in here who would profit from more widespread fear with regards to the future.

Fearogen is as much a selling shtick as hopium.



hedgeless_horseman's picture



...but right now there's no signs of that in the real world.

Are you trying to breed a black swan?

From Germany With Love's picture

No. But, you know, fear has a property of being self-fulfilling. Where do you draw the fine line between being vigilant versus going overboard and succumbing to hysteria?

Ghordius's picture

Many commenters (imo incorrectily) think the gold price is directly correlated with Fearogen, or just cheer their shorts

Manic by Proxy's picture

With global mood going negative in an epic trend not seen since..... forever, increasing hostility between nations and among political factions, it actually appears that was is an absolute slam dunk. Long boating accidents.

Manic by Proxy's picture

With global mood going negative in an epic trend not seen since..... forever, increasing hostility between nations and among political factions, it actually appears that was is an absolute slam dunk. Long boating accidents.

forwardho's picture

Baltic dry index crashed in Sept/12

It has been flatlined since.

Supply lines have stopped, all we have is inertia... until we don't.

Inthemix96's picture


The Gideon Osbourne is an inbred, blue blooded twat who has never served a single days usefulness in his entire life (pretty much like all who have gone before him), and to top it off, him and his mates in all three major parties here think the public think they deserve a 32% increase in standard wage while us poor fuckers carry on with less bailing out banks and failed institutions.

What I am getting at here mate, is they dont have a clue how the real world works seeing as they dont live in it, and they certainly dont care, so yes, if you want Gideon to even try to understand what the fuck is going on, what the fuck to do about, or how to implement it, you may be in for a long wait.  The inbred cunt will bankrupt us before he knows what he has done.


Toolshed's picture

Nips? What a racist douche bag you are.

Anglo Hondo's picture

Short for 'Nippon'.  Why racist?


hedgeless_horseman's picture



I think his definition of racist is a little broad, and conveniently so.  But if that and "douche bag" are the only cards he has, then I guess he must play 'em.

I do wonder if calling a citizen of Great Britain a "Brit" is considered racist? 

strangewalk's picture

Not the same. The term Nip has always had a derogatory association, like Jap or Chinaman

hedgeless_horseman's picture



The term Nip has always had a derogatory association

Really?  Are you sure of that?

Derogatory?  Maybe.  Always?  Doubtful.  Racist?  No.

One of my great uncles fought the "nips" in the Pacific, and he was no racist.  Another, my grandpa, fought the "krauts" and the "degos" in North Africa, Sicily, and Italy, alongside some "limeys".  He wasn't a racist either. 

Hitler was a racist.  Hirohito was a racist.  Churchill was a racist.

My uncle and my grandpa just hated the enemy.  There is a difference, I think.


prains's picture

the bridge over auckalnd harbour is affectionatley known as the "nippon clippon" when they widened an in situ bridge with more lanes. Smart fuckers but also ruthless, many a good man died on forced death marches forced on them by the NIPS.


and nips they will always be.

From Germany With Love's picture

The DM in the 80s... was that a weak currency? Manufacturers of high-end gear don't need low prices as much as producers of bulk stuff.

'Made in Germany' will still have quite some appeal - even without Euro debasement. The problem rests at first with the other Euro nations who need a trade surplus to pacify creditors.

hedgeless_horseman's picture



The problem rests at first with the other Euro nations...

Problem?  Solution, I say. 

There are many ways to slow a horse that runs too fast.  Saddling the horse with extra weight is the most common method.

From Germany With Love's picture

The point of races is to try to go faster than everybody else; the alternative is called socialism. Now as a competitor, you want to give that fast horse of your rival extra weight... naturally. I'll grant you that.

hedgeless_horseman's picture



The point of races is to try to go faster than everybody else

Friend, let me give you a bit of unsolicited advice.  You need to make sure that you never take any money to a race track. 

From Germany With Love's picture

First of all, I am no betting person. But thanks for the unsolicited advice.

Secondly, you're extrapolating from my posts on to how 'many Germans' think? On which basis?

Sandmann's picture

Made in Germany means substantial value-added was in Germany even if the sub-assemblies were Chinese or Hungarian

From Germany With Love's picture

In the modern shallow world, branding translates into value. That's why China won't catch up with the west as fast as many seem to believe. All the big, valuable brands have their home markets in the West.

Now if we talk about nations and not companies, Made in Germany is still a brand that matters.

joego1's picture

Looks like a great opportunity to trade fiat for stuff.

Carl Spackler's picture

Yes, stuff for fiat, if you are an over-populated, Asian nation with third world qualities.

etresoi's picture

Abe's policy is a fiscal devaluation of about 22% annually!

The impact of this policy on the common Japanese citizen is going to be catastrophic and will lead to the collapse of the economy and government. 

Not Too Important's picture

Japan already has a new plan to slash retirement pension and health care costs that are the envy of the world:

Let elderly people 'hurry up and die', says Japanese minister

Only countries that follow this new plan will be viable in the short-term - forget medium- and long-term. Currency debasement doesn't do much when everyone is doing it, and with retirement costs the most expensive of all sovereign fiscal liabilities, the 'Japanese Hurry Up And Die' plan will be the new global call. Queuing the IMF in 3, 2, . . .

And people said there were no 'Death Panels' in Obamacare. Hahahahaha.

Winston Churchill's picture

How you say Obomacare in Japanese;.



Rustysilver's picture

What the Western countries and Eastern countries are not accounting for is the disease such as dementia and Alzheimer.  The costs are in the Trillion of dollars.  It will swamp everything else. Because of obesity and other life styles these diseases are showing up in people in their 50's and 60's.

bidaskspread's picture

It's hard to export radioactive unemployment. Tripartite Agreement anyone?

PUD's picture

One unified world currency and an end to nationalistic competition. The planet is too small now for neighbor to be one uping neighbor. You may not like it for some arcane irrational reason but that is the way it is in the 21st century. We either work together or go down together. This is fact not idealistic opinion.

kridkrid's picture

See, I go the exact opposite direction. No global currency, no national currency... I see no need for either.

Jethro's picture

I have hope for, but no faith in our species.  We are by our very nature tribal, brutal animals.  You call for egalitarianism for a species, and only those individuals (or groups) fool enough to beilieve it will wind up enslaved or dead.

forwardho's picture

Your statemant may be a fact, however, knowing humans it is very idealistic to think we will take that path.

Sandmann's picture

Hell it didn't work in Europe so now you want to go Global with the Euro ?????

Ghordius's picture

isn't it too early to say that? and there is no need for "going global"

as long as we have fiat currencies, we have to remember that they are based on faith

powerful stuff, that

From Germany With Love's picture

No, that's a shaky foundation because people are unsteady.

darteaus's picture

"What a maroon."

-- Bugs Bunny

Carl Spackler's picture

Let me get this straight.  German politicians are crying because Japanese politicians beat them to the punch over their China fantasies?

Both countries believe they can just soften their currency, and the Chinese will keep buying more machinery, from the relatively cheaper seller, and this will keep both economy's solvent?

Good luck with that.  The Fed is way out ahead in that race and not looking back anytime soon.





suteibu's picture

Kyle Bass was right.  Japan is going to become the world's biggest problem.

oak's picture

Even before WWII, Japan always had been world's biggest trouble maker. IMHO, Japan is dying slowly before Abe. Now he is accelerating it. I certainly hope Germany defeats them in this currency war.

darteaus's picture


What options present themselves to a xenophobic country with a 4000 year mlitaristic heritage after 20 years of failed monetary policy?