Why is the Japanese Yen So Strong? Business Writing: Week11 s1180035 Shota Furuya
Contents● Japanese Yen is getting stronger● Bad points in Japanese economy● The reason of strengthening● Demand for Japanese Assets● Conclusion● References
Japanese Yen is getting stronger● Nowadays, the yen in Japan (JPY) is getting stronger against the dollar in U.S. (USD).● JPY to USD rate has a fluctuating pattern, but is getting lower and lower since about 20 years ago.
Bad points in Japanese economy● Due to damages showed before, the finance and economy of Japan doesnt look good, compared with U.S. ○ The domestic interest in Japan is the lowest in the world. ○ Japan has an aging population, and this stops the growing of Japanese economy. ○ Japanese public debt is twice as U.S.s public debt.
The reason of strengthening (1/3)● The strengthening of Japanese yen is caused by demand and supply of yen.● The increase in strength of Japanese yen means there is more demand and less supply of yen.
The reason of strengthening (2/3)● These demand and supply is caused in trades and investments.● In trades, ○ Exports from Japan causes demand for yen. ○ Imports to Japan causes supply of yen.● In investments, ○ Investments from foreign countries causes demand for yen. ○ Investments from Japanese investors for foreign countries causes supply for yen.
The reason of strengthening (3/3)● In trades, ○ Japanese economy is based heavily on exports, so the demand for yen increases. ○ On the other side, U.S. economy is importing more than exporting. This causes the decreasing of JPY to USD rate.● In investments, ○ There are a demand for Japanese assets. ○ This demand is not very strong recently, however the more the strength of Japanese yen increases, the more the strength of demand increases.
Demand for Japanese Assets● The demands for Japanese Assets come from many aspects.● For example: ○ Foreign reserves diversification ○ Investors who wants a temporary parking place when they sell their other assets ○ Perceptions among market players ○ Expectations in interest rate between JPY and USD
Conclusion● Japanese yen is strengthening in last 20 years.● There are two reasons why Japanese yen is strengthening: ○ Japanese economy is based on exporting rather than importing. ○ The demand of Japanese assets is very increasing.
References● Why is the Japanese Yen so Strong (Stock Trend Investing) http://www.stocktrendinvesting.com/blog/why-japanese- yen-so-strong● Why The Yen Is So Strong (Investopedia) http://www.investopedia.com/financial-edge/0411/why- the-yen-is-so-strong.aspx● Japans in crisis: Why is the yen strong? (CNN) http://business.blogs.cnn.com/2011/03/17/japan%E2% 80%99s-in-crisis-why-is-the-yen-strong/