Dollar’s Replacement Is Just

6,700 Miles Away

Commentary by William Pesek

Aug. 13 (Bloomberg) -- Forget all this chatter about finding a new reserve currency. We already have one, and it’s called the yen.

Before dismissing the idea, consider how the yen is strengthening because investors figure it’s a safe bet. It’s popping up more and more in market stories about how the yen is enjoying a haven status -- even if it’s at odds with events in Japan’s economy.

Japan is in a recession, deflation is afoot and debt is approaching 200 percent of gross domestic product. Investors returning from two decades in hibernation and looking at Japan’s fundamentals might run away. And yet, the yen has gained 14 percent against the U.S. dollar over the past year.

We can deduce three things from this surreal turn of affairs. One is the absurdity of our times. Two, this whole concept of a reserve currency needs an overhaul. Three, those figuring the yen can only rise in value may be disappointed.

The first point is the most intriguing. It’s true that the yen has been a pretty consistent winner for investors betting on a weaker dollar. Regardless of its structural problems, Japan has a stability to it that’s unique. Huge shocks play out over decades or years, not months or weeks.

That said, the idea that the yen is an oasis of prosperity in an otherwise crazy world shows the extent to which things have gone mad. Is Japan, the weak link among developed economies for the last 20 years, really a place investors can escape to?

Crazy 18 Months ( learn more at )