Special Consultant to the FPA
Absolutely Rahman. Actually we were looking at the same issue, as Japan Trading balance and current account has dropped almost to the zero because of Commodities prices. So, the US has lost another source of external liquidity support.Personally, I think the comfort zone for Japan is the 110-125 levels, after which they can still and will bear with their currency weakness. But at and over the 130 levels, Japan will start to feel the heat and need to intervene to bring their currency down to their comfort levels. Essentials imports like oil & gas have to be paid in US$ and with record high prices for these commodities, that draws down Japan's foreign reserves which they cannot sustain over a long period of time. Also, imported goods will become more expensive in Japan.
Hopefully, I am correct in my assessment.