Just as the Beatles sent the world into a frenzy in the summer of ‘64, rockstar Prime Minister Shinzo Abe’s latest hit “Abenomics,” is taking Japan by storm. Since announcing his economic jumpstart policies back in November, the Nikkei (^N225) has surged 70%, and now comes fresh evidence that the economy has improved as well, with GDP climbing higher due to strong exports and factory output.
Economists and investors may be praising the sweet tunes of “Abenomics,” however the successes are coming at what some are saying is a steep cost. “[Abenomics] has made the stock market go up quite a lot, it’s been dramatic, but it’s made the currency collapse,” legendary investor Jim Rogers, says in the attached video.
“The [Yen], which is one of the major currencies of the world, has collapsed 27% in no time,” Rogers notes. “It’s a very, very dangerous move.”
Since the Yen blasted through 100 parity level with the U.S. dollar, its slide has continued to a new 4-1/2 year low.
As a general rule, Rogers is skeptical of governments that devalue their currencies. “I know the government is reporting that [the Yen’s] move is good, but I don’t trust governments. I don’t trust our government, their government, or anybody else. Their government is as good at lying as ours is.”
Rogers, who started the legendary Quantum Fund with George Soros, says the Japanese government is being coy about the deleterious effects of the Yen’s slide because Mr. Abe wants to win elections this summer, and it will ultimately be the Japanese citizens who will be left holding the bag.
“One hundred twenty-five million Japanese [stand to lose the most] because of inflation. Everything Japan imports, they import a lot of stuff, is going to go up dramatically in price, everything is going to go up," says Rogers. "So the Japanese will suffer, but… stockbrokers will do better, currency traders will do better.”
But Rogers isn’t about to shy away from Japanese equities due to his distaste for the Yen’s demise.
“I still own Japanese shares, I sold some last week, not all, but some,” he says. “If [Japanese equities] drop down for some reason conceivably I would buy them back, but I don’t know what would make them go down though because there’s money printing everywhere.”