Jason Kelly

We've seen a lot in the financial media recently contending that the reason the US Treasury secretary and other officials claim to support a strong dollar but do nothing to get one, is that they want to help US exporters earn more by keeping the dollar weak. A weak dollar makes American goods cheaper overseas and inflates profits when local currencies are repatriated to dollars.

Let's put that idea to the test. Take a stroll with me through the stores of Japan to see, (A) how many US exporters we find among the offerings and, (B) whether their goods are any cheaper than other fare, thanks to the weak dollar.

At the grocery store, we find local seafood, produce, and dairy products. Anything imported tends to be fine cheeses from Europe and sauces from South America. We can find US companies among snack foods, such as Doritos, but the few offerings are no cheaper than their Japanese counterparts. In fact, a Snickers bar, for instance, is smaller than its equivalent in the US and costs more. We can find a healthy sampling of US companies among the alcoholic beverages, where Jack Daniels is a favorite, but Japan offers alternatives in each category, of high quality, and better priced.

Outside the grocery store, let's walk across the street to the car dealerships. This is Japan. End of discussion. Unless you're out to buy a BMW or Benz, you're going to buy something made in Japan. Next.

Restaurants. McDonald's and Starbucks are wildly popular, and to a lesser extent KFC and Baskin-Robbins make a showing. In all four cases, however, prices have remained constant throughout the currency fluctuation. McDonald's was always cheap and still is, Starbucks was always a rip-off and still is, KFC was always priced in line with local restaurants and still is, and Baskin-Robbins was always seen as a premium product with high prices and still is.

Off to the mall. Trinket shops, furniture shops, and clothing stores are filled with goods made -- where else? -- in China. Even supposedly Japanese pottery, linens, paper, traditional clothing, and other mainstays of the culture come mostly from China these days. It's hard to find a locally made gift for visitors, and none of the foreign-made stuff is ever from the US.

It seems to me that the top export from the US in recent years was securitized subprime mortgages and other breakthroughs from the financial engineering gang. Those were well received by already bankrupt Japanese banks, but not by ordinary citizens.

Speaking of which, is it possible that the real reason interest rates are slated to stay low for a long time has nothing to do with keeping the dollar weak for exporters, but everything to do with making sure the coming wave of Alt-A resets sees mortgages converted to better terms? Probably.

Posted by Jason Kelly at 6:00 PM Japan time
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