The places to look for real trouble ahead this year and next are not the numerous inflation indexes, such as the CPI or even measures of economic health, most notably GDP. Instead, this segment of What’s Ahead advises investors to pay close attention to the foreign exchange markets, especially the Japanese yen.
For years Japan’s government has been binging on debt, which proportionately is twice that of ours. Simultaneously, it has suppressed interest rates. With inflation forcing higher borrowing costs, the era of free money is over. The yen is weakening, which, given the size of the Japanese economy, will set off serious economic and political shock waves.
Tokyo is not alone here. All currencies are wobbly. Get ready for noise about tariffs, devaluations and trade restrictions—all reminiscent of the beggar-thy-neighbor actions of the 1930s that led to WWII.
