Why is the Japanese Yen so Strong s1180091 Masayoshi Kataoka
Contents• Introduction• Yen/Dollar Historic Trends• Expected the Opposite• Demand for Japanese Assets• Case of Currency Impact• The Strong Yen Characteristics• Conclusion• Reference
Introduction● Recently, the Yen was the highest level the currency has hit.● I think that why the Yen so strong and I want to know that reason.● Here are the research and conclusion on it.
Yen/Dollar Historic Trends● The Yen/Dollar exchange rate has a fluctuating pattern with continuous lower tops.● The Yen is getting stronger than Dollar● The Yen was then relatively very strong before 1996 and after 1996.
Expected the Opposite● The domestic interest rates in Japan are about the lowest in the world and not very attractive to park your money.● Japan has an aging population and this will temper the economic growth in Japan.● Japanese public debt as a percentage of GDP is about twice the size of the U.S. public debt.
Demand for Japanese Assets● Japanese assets coming from partly foreign reserves diversification.● Japanese interest rates have always been the lowest, but when the expectation is that this difference is will become less big.● Thus, The same thing will happen in outside Japan that are expected to become more risky or providing lower returns.
Case of Currency Impact● The initial reaction in the currency markets was a strengthening in the value of the yen versus the U.S. Dollar in the earthquake on March 11.● Thus, Japanese investors would pull their money out of other countries and put it back in Japan. And that’s exactly what did happen.
The Strong Yen Characteristics● It’s a stable currency and a relatively economy that’s not affected so much by global crises.● But, when the yen gets too high, Japanese companies cant sell their goods overseas and this causes major problem for the Japanese economy.
Conclusion● I knew why Japanese Yen so strong alongside of Dollars.● I understand that Japanese Yen might need from the market and Japanese government that fund relief and reconstruction efforts in Japan.