Japan Buys More of Euro Bailot Bond Article Example | Topics and Well Written Essays - 750 words

Japan Buys More of Euro Bailot Bond - Article ExampleUnlike Japan, other countries are not inclined to buy the European bonds because of the increasing debt problems which confront Europe. Even China which bought the bonds previously has not shown any intention of purchasing additional bonds. The financial crisis in Europe has made the languish stronger, making Japanese products less competitive than other products in the world. Because of this, the Japanese government has intervened in the currency market to dampen the yen, which was opposed by the European countries. It is not clear though whether this opposition by European countries triggered the reduction in the purchase by Japan of the EFSF bonds. The Japanese Finance Ministry defends its position by saying that the reduction in the purchase is based on the euro liquidity in its reserves and the conditions of the EFSF securities (Nakamichi , par 10). As a background information, the European monetary Stability Fund was set u p in May 2010 with $625M. It was set up to bail out Greece to keep the turmoil caused by its debt from spreading to the euro-zones weaker members (The New York Times , par 1). ... This article shows the importance of rescuing the European countries. Even if Japan is also beset with the problem of reconstruction after the devastating seism and tsunami last March, it still purchased the European bonds because it is aware that a recession in Europe get out have a domino effect. Once European conduct falls, the American, Japanese and Chinese economies will be adversely affected. Japan realizes that if the market confidence on the euro falls, there will be financial and trade disruptions. This scenario will lead to another global recession which the Japanese government would not like because their economy is export-driven. Since Japan has excess foreign reserves, the Finance Ministry decided on purchasing the Euro bonds to help the European economy. Next to China, Japan is known to hav e the worlds second-largest foreign-exchange reserves. The move of Japan to buy the Euro bailout bond is very laudably because one sees the concern of Japan to avert a worldwide crisis. Japans move means that they want to do their share in change the global financial system. The purchase of Euro bonds by Japan will help sustain the euro which has declined versus the yen. Hopefully, with Japan buying more Euro bonds, other countries will trust the turn over more and purchase the bonds too to help Europe get out of the crisis. It will boost confidence in the EFSF further. Regarding Japans intervention to weaken their currency, one sees this as a move to help the countrys exporters. Having a strong yen makes Japanese goods more expensive for foreign buyers and would turn up in a decline in profit margins for the exporters. However, one does not see this as an effective way to improve its