English assignment11
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English assignment11 English assignment11 Presentation Transcript

  • Why is the Japanese yen so strong? s1190073 Rina Sato
  • The current status of the Yen ・Recently, the Yen reached high against the Dollar.
  • Historic Trends of Yen and Doller ・The Yen is getting stronger against the Dollar during the last 20 years. ・Exchange rate of Yen and Dollar has a fluctuating pattern with continuous lower tops. ・The Yen has strengthened since mid 2007.
  • The economic situation for Japan ・The domestic interest rates are the lowest in the world. ・An aging population of Japan will temper the economic growth. ・GDP of Japanese public debt take about twice the size of the U.S. public debt.
  • Demand and Supply ・When there is more supply and less demand for Yen’s, the Yen will weaken, but when there is more demand and less supply of Yen’s, the Yen will strengthen. ・Also, the strength of a currency is driven by trade and current accounts.
  • Trade Cash Flow ・Japan has a trade surplus because exportation is more than importation. ・The strengthening currency could lower exports and increase imports in the long run, but in the short term it reinforces itself. ・The U.S. is importing more than exporting, so the U.S. currency weaken.
  • Investment Cash Flow ・There is a strong demand from non-Japanese investors for Japanese assets, especially short- term money market instruments. ・Recently, the demand for assets outside Japan has not been very strong.
  • Demand for Japanese Assets ・Demand from non-Japanese investors could come from foreign reserves diversification. ・The very low interest rate on U.S. treasury and the strengthening trend in Yen, Yen money market instruments could look very attractive with the poor performance of stock markets around the world.
  • Summary ・The strengthening of the Yen is caused when Yen is more demand. ・The reason that Yen is a currency with net inflows is the Japanese trade surplus, the low return on investments in the rest of the world, the expected monetary policy in the U.S. and the diversification of foreign reserves in other countries away from the U.S. Dollar and Euro.
  • References http://www.stocktrendinvesting.com/blog/why- japanese-yen-so-strong http://www.wikinvest. com/currency/Japanese_Yen_(JPY) http://www.voxeu.org/article/what-do-about- japan-s-current-exchange-rate