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Yen Weakness Means Less Than You Think

Yasuhide Fumoto | Photodisc | Getty Images

The yen's epic fall has netted billions for hedge funds and sparked a furor over a possible global currency war - but don't expect it to do all that much for the Japanese economy.

That's the word from Paul Donovan, deputy head of global economics at UBS.

"A lot of the nonsense that we're hearing about currency wars and all the rest of it - it's really the economics of a generation ago," he told CNBC.

(Read more: 'CNBC: G20 Defuses Talk of 'Currency War')

"What is going on is that over the last twenty or thirty years, a lot of companies, in particular in Japan, have moved away from invoicing in foreign currencies all the time, and they're now invoicing in their own currencies," Donovan says. That means that an importer of Japanese products - especially in Asia - will pay for the goods in yen, and the Japanese company will see no gain from the weaker currency.

Donovan says that about nearly half of the Japanese economy that contributes to exports will be unaffected by the yen's fall.

"When we look at yen depreciation, it's not true to say that this is universally good for the economy," he concludes. Certain industries, like autos and consumer electronics, will feel the effects, "but the whole economy, absolutely not. And the idea in Japan or elsewhere that weakening your currency is going to turn things around - well, if that was the case, why is the U.K. not turned around more dramatically?"

Why indeed.

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