Japan is facing two types of collapsing trade, but the one affecting Sony and Honda is a symptom of the other.
Japan is currently being harmed first and most by a collapsing carry trade. The effect of this is to drive the exchange value of the Yen higher and higher, which then harms both the volume of exports and reduces the yen value of repatriated profits, a double whammy for an export dependent nation.
For now, Japan is simply making wounded noises, hoping the US will listen and relent. I’ll explain that last sentence in just a minute; first here’s a sample of the wounded noises:
Japan Escalates Warnings on Yen’s Advance as Sharp’s Earnings Collapse
Japan’s Finance Minister Jun Azumi escalated his warnings against strengthening in the yen toward a postwar high, and signaled that the Federal Reserve is partly to blame for its recent advance.
“Speculative moves are increasing in the market and we can’t overlook them,” Azumi told reporters in Tokyo today as the yen heads for its biggest six-day jump since mid-August against the dollar.
Against the “backdrop” of the Fed’s plan to keep interest rates exceptionally low until 2014, “short- term speculative buying” has increased, contributing to the yen’s gain, he said in parliament today.
(Source)
What’s really happening here is that a 15-year-long carry trade is unwinding, and this is now working against Japan’s interests.
The Fed, emulating Japan’s efforts by lowering interest rates to zero, has offered the international carry trade participants an even larger, more liquid, and safer place to practice their craft than Japan can offer.
by jim-h-2 
