Curreny War in Asia could now get underway. Japan bets over $1 Trillion to try and increase inflation to 2 percent.

English: Series E 10000 Yen Bank of Japan note...

English: Series E 10000 Yen Bank of Japan note. Portrait: Fukuzawa Yukichi. First issued in 2004. 160mm x 76mm. (Photo credit: Wikipedia)

North Korea is a distraction, at least till May. Japan just fired the first round of what I believe could be the coming Currency War in Asia. China has never forgotten, nor forgiven Japan for the atrocities during the Japanese occupation of China during World War 2. Chinese citizen have held huge demonstrations and called for boycotts of Japanese firms, goods and services.

Japanese Occupation - 1940

Japanese Occupation – 1940 (Photo credit: Wikipedia)

Now the Bank of Japan has decided to pump over $1 Trillion Dollars into the Japanese economy over the next two years. On that news the Yen fell. As the money is pumped, the Yen could fall further.

So what? As the Yen falls, foreign money will be able to buy more Japanese made goods for the same amount of Dollars. China will not sit on its hands and let that happen.  The difference is that China can afford to play hard ball.

If a Currency War starts up, then I expect more trouble for Japanese firms located in China and a furthering of the Chinese Boycott of Japanese goods and services. China is the largest and fastest growing market for consumer goods in the World. If Japan gets locked out of that market, no amount of stimulus will save its economy. In the meantime, Consumers in North America and Europe could benefit from lower wholesale prices (if the savings from lower costs are passed down).

If a Currency War starts and other mistakes are made, then it might not take much for the Drums of War to  start beating. I suspect that the Asia, just entered into a most dangerous time.

Reuters posted a new article about the Bank of Japan action plan. You can view that by clicking on the following: Bank of Japan’s $1.4 Trillion Pumping plan.

Now waiting for China’s reaction, as I suspect that China might not be at all thrilled by the course of action that the Bank of Japan is about to take…

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