8 in annual slide instead of 2 Les Echos on December 11 2006

Paradox. At the time where the Japan celebrates the longest cycle of growth since the end of the second world war, its economy suddenly seems to lack a clear direction. A few days of two economic deadlines, the publication of the quarterly Tankan report on morale businesses, and the meeting of the Monetary Committee of the Bank of Japan, the concerns of the experts on the real health of the second economy in the world are reinforced by the continuing weakness of the yen, mainly against the euro. Yesterday, the European currency again reached a record high in exchanging evening 154.84 yen per euro. At this rate, some experts do more exclude cross the Cape of the 160 yen per euro in the coming months. For its part, Derek Halpenny, a currency expert at Tokyo Mitsubishi UFJ Ltd., expects a course of 120 Yen to the dollar and 156,50 per euro in the three months to come.

This situation is not totally surprising and support by the latest statistics for the third quarter (July-September). The effect of a cold shower they were showing a serious downturn in the economy. The hole of air in the third quarter resulted in a strong correction downward growth forecasts, now settled to 0.8 in annual slide instead of 2 ("Les Echos" on December 11, 2006). Aggravating, these short-term uncertainties are doubled for a rate differential between the Japan and the rest of the world, and to the European Union primarily. The phenomenon of the "carry trade", initiated in 2005, highly inflated this year. It is to play on rate differentials, borrowing in yen, inexpensive, and then placing the amounts to be significantly more remunerative rates, Europeans including. Although extremely difficult to identify and therefore to quantify this phenomenon would be 40,000 billion yen, according to a calculation of JP Morgan, who sees no limit in time to exercise. "We believe that the"carry trade"will continue in 2007 and keep the pressure on the yen," said Tohru Sasaki, analyst for JP Morgan.

Another factor contributing to the ambient heaviness comes from the new Government team. After a waterspout start marked by reconciliation with China, the Government of Shinzo Abe now seems more concerned with political deadlines of 2007 rather than by the reforms. The reinstatement in the ranks of the Party of "renegade" excluded by Junichiro Koizumi after the vote sanction on the reform of the post in August 2005 fears that the country falls in past political manoeuvres. The time, 71 of satisfied with the end of September, Shinzo Abe is fallen to 59.

Bleak year end

In this unusual context, the end of the year is likely to be sluggish for the economy of the archipelago, because none of the two deadlines will revive that is currently lacking. The elders decide to remove the rate differential and tightening monetary policy, but take the risk of squeezing the economy either, they prefer to do nothing even allow "carry trades" to develop further, promise of a lower yen. Remains the Tankan report, which could put on stage the optimism of the large companies. But, as it come to cut their spending in investment, he did y was not there either, many novelties to wait.