I have indicated
in recent weeks that I no longer regard the yen as undervalued (as I did before
), and I now regard it as overvalued against most currencies. The reason for this shift in opinion is not that I think I was wrong in the past, but that the value of the yen has since then appreciated dramatically, 23% in 2008 alone against the U.S. dollar
and even more against all other mayor currencies except the Swiss franc and the yuan. The gain was particularly dramatic versus the currency of its close neighbor and competitor, South Korea, with the yen rising 66% against the South Korean won. At this point, the yen is certainly overvalued against the won.
The effects of this overvaluation can be seen in the fact that troubled Japanese car giant Toyota
according to this article in Times Online
has decided to break its old "buy Japanese" tradition and buy steel for its cars from Korean steel makers.
The article also reports of other companies shifting purchases to South Korea and many Japanese shoppers indulging in "strong yen shopping binges" in Seoul.