Yen for Protectionism
25 September 2006
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
Dear Editor:
Rep. Joe Knollenberg (R., Mich.) asserts that Japanese automakers are subsidized by an undervalued yen (Letters, October 2). Rep. Knollenberg - whose position on this issue surely is grounded only on his dispassionate evaluation of the arguments and evidence and has nothing to do with his being elected by voters in Michigan - overlooks the fact that an undervalued yen will cause the prices of goods and services denominated in yen to rise.
So as the value of the yen falls, enabling (it is true) each dollar to buy more yen, another effect is that the nominal yen-price of Japanese-made cars rises, reflecting the yen's lower value. The net result is no advantage to Japanese automakers seeking to sell more cars abroad.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
Dear Editor:
Rep. Joe Knollenberg (R., Mich.) asserts that Japanese automakers are subsidized by an undervalued yen (Letters, October 2). Rep. Knollenberg - whose position on this issue surely is grounded only on his dispassionate evaluation of the arguments and evidence and has nothing to do with his being elected by voters in Michigan - overlooks the fact that an undervalued yen will cause the prices of goods and services denominated in yen to rise.
So as the value of the yen falls, enabling (it is true) each dollar to buy more yen, another effect is that the nominal yen-price of Japanese-made cars rises, reflecting the yen's lower value. The net result is no advantage to Japanese automakers seeking to sell more cars abroad.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Saturday March 29, 2008 at 4:42pm