Why is the Japanese yen
s1190073 Rina Sato
The current status of the Yen
・Recently, the Yen reached high against the
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
・An aging population of Japan will temper the
・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.
・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.