Credit ratings agency Fitch cut its outlook on Japan's sovereign debt, warning that the vast cost of a March earthquake and tsunami and the still-unknown bill for the clean-up after the nuclear disaster would further strain the country's already shaky public finances which resulted in the USD/JPY again in stumbling position and dropped to the 80.82 level. The public debt size is already twice of the 5 trillion economy of Japan. On one hand japan is already working hard to rebuild its infrastructure while on another hand its given that it works hard on its financial soundness so definitely all this will create a doubt among investors that govt can make much headway in plans to reform tax and social security while the struggles with the nuclear crisis.
An ultra-loose monetary policy in developed markets coupled with weakening currencies, particularly in the U.S., Europe and Japan, growing demand from rapidly industrializing nations such as India, China and Brazil coupled with production disruptions across the world have led to a sharp rise in commodity prices and hence inflation.
Will it continue in the future? Doubtful, because most commodity prices, particularly oil, have reached a point where they start affecting growth. Sooner or later demand supply dynamics will take precedence thereby cooling off commodity prices.
