Reply To: Devaluation of currencies.


The law of one price operates for all goods, including money. Each unit of money will tend to sell at the same price in a given market at a given moment. However, the accuracy of different people’s speculation about the extent of future price inflation can lead to differential speed of movements in different parts of the market. With money, if international currency speculators make more accurate anticipations than the man on the street, when the money stock is increased the currency tends to devalue in foreign exchange markets before its purchasing power goes down domestically. When that happens exporters gain a temporary advantage.

As long as Japanese exporters sell their outputs in countries where the yen is devaluing against foreign currency and buy at least some of their inputs in countries where the yen is not depreciating commensurately, they would gain. I would guess that Japaneses companies buy some of their labor and rent or own some of their land area in Japan.