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Albert Edwards: Forget the US, Japan could stoke '97-style crisis
by Robert St George on Oct 04, 2013 at 14:02
Société Générale strategist Albert Edwards has urged investors to turn their attentions away from the US government shutdown, arguing that developments in Japan could stoke another currency crisis.
Edwards, a renowned perma-bear, highlights Japan’s proposal this week to hike consumption taxes for the first time since 1997 - a year that saw country descend into recession.
‘The recent decision to press ahead with the rise in the consumption tax from 5% to 8% in April next year is seen by many as a major policy error,’ argued Edwards.
CNBC reported that Edwards takes the view that the Bank of Japan could unleash more monetary stimulus in an attempt to stave off another recession, which would weaken the yen and therefore strengthen other Asian currencies on a relative basis.
‘In my view we are quickening the pace towards losing control of both the Japanese currency and inflation,’ Edwards commented. ‘We reiterate our view that any decline in the yen at this time will echo the 1996-1997 period where yen weakness put a severe strain on other Asian countries’ balance of payments and contributed in large part to the 1997 Asian currency crisis.’
Edwards added: ‘The impact of this on the West is not rocket science. There have only been two occasions when U.S. implied inflation expectations have turned negative: the 2008 in The Great Recession and 1998, in the wake of the Asian crisis.'
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