Japan’s Impossible Trinity

Most people who aren’t currency experts haven’t spent time thinking about what drives currencies up or down. Right now, Japan is dealing with what’s known as “The Impossible Trinity”. Basically, it is impossible for a currency to have all three of the following at the same time:

– A fixed foreign exchange rate
– Free capital movement
– An independent monetary policy

The BoJ is busy trying to strengthen the Yen but it comes at a cost.