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Masoud : Yen and the Japan Earthquake

Hello koala king and folks.

Good day to you.

I got many messages from traders about same question: After the earthquake and tsunami in Japan, why the yen strengthened against other currencies and climbed?

Crises are divided into several categories: Natural crisis, economic crisis, the crisis of war, terrorist attacks, and political crisis…

If natural crisis is causing great damage, in the short term because the government will allocate funds and increase the supply of essential items, the desired currency is greatly strengthened. (as long as not too much damage such as war ) However in the long term, the currency value will possibly become low.

Studies have shown that such events and natural disasters in countries have had positive economic effects because economic activities arise from the efforts to repair damages caused by such events. Due to the very high increase in construction work, a kind of economic prosperity emerges and even has caused the unemployment rate to be decreased. Of course most likely the insurance companies and reinsurance companies may face challenges due to financial problems from the earthquake damage.

It is possible that the Japanese government in the next few days may amend some economic policies such as tax reduction or debt relief. This relaxation of fiscal and monetary policies in the short term in Japan will probably increase inflationary expectations. This may be short-term inflation in prices of oil or certain foods we see in the near future. Of course we should not forget that the Japanese government during recent years had not been able to create inflation and the sudden departure of Japanese capital from financial markets may cause some unpredictable events on markets and the global economy. I recommend close monitoring of the volatility of markets.

Now much of the Japanese capitalists and their capital outside in Europe and America are returning to Japan to invest and rebuild. Because Japan has a strong infrastructure, even investors in other countries begin to shift their financial resources toward Japan to use this opportunity.

Now the only big problem is the leakage of radioactive materials. If this is not a big problem, even this incident will probably not affect Japan’s economic boom.

But do not forget Japan and all we pray for the people of Japan.

Have nice time.

Masoud.

Masoud is a businessman and a Senior Forex Koala. Connect with him at our page on Facebook.

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