Bank of Japan Printing Money Part of Currency War?

The Bank of Japan now prints money to bolster their economy. They've resisted this for years and the Japanese economy has languished in a kind of soft depression for two decades. So now, facing continued slow growth, they've finally pulled the trigger on what has been in the works for some time: massive printing of money to force their currency, the Yen, down. Making the Yen cheaper will stimulate their economy because now Japanese goods will become more competitive, as the price gets cheaper with the cheaper Yen. At least that's the theory.

Bill Gross of PIMCO thinks this may exacerbate the ongoing currency war developing around the globe. He doesn't call it "currency war" here, but that does seem to be what he's talking about:

“Much more depreciation of the yen has to take place in order to get even close to 2 percent” inflation, Gross said yesterday on Bloomberg Television’s “Street Smart” with Adam Johnson and Sara Eisen. “I’m not sure that other G-7 countries are willing to permit that. They’ve to got to control it to some extent,” said Gross...

That "control" will be the other countries depreciating their own currencies. When this takes place at the level it now appears to be taking place, you get currency war. And despite years of hearing government leaders eschew the "Beggar Thy Neighbor" that many believe intensified the Great Depression, it looks as if that's precisely the direction more and more countries have chosen. After all, if Japan lowers the value of its currency and its goods become more competitive, their action will be seen as "unfair" by, let's say for instance, Germany, who will then complain and lobby to get the Euro to devalue so they can keep selling their Mercedes and BMW cars all over the world, rather than concede market share to Lexus and Infinity.

That's currency war, and that's "Beggar Thy Neighbor." But whatever you want to call it, on and on it goes; where it stops, no one knows.

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