September 28, 1999

The yen/dollar exchange rate has been a hot topic in recent days. Claims in the press include, among others, that Japan has a much tighter monetary policy than the U.S. A second argument is that the weaker dollar reflects higher future U.S. inflation. It has also been claimed that a stronger yen results in a capital outflow and produces much higher interest rates in the U. S. and a decline in the U.S. stock market. Needless to say, since weve targeted these claims, we have different views. We believe the yens rise is bullish for Japan and is of little consequence to the U. S. financial markets.

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