This document summarizes the reasons for the strong Japanese yen and its implications for Japan's export-driven economy. It explains that Japan has a large trade surplus which creates high demand for yen, strengthening the currency. A strong yen could hurt exports in the long run by making Japanese goods more expensive overseas. However, in the short term the yen reinforces itself by reducing the supply needed for imports. The document also notes that while a weak US dollar doesn't necessarily mean a strong yen, Japanese consumers benefit from a stronger currency keeping domestic costs of goods stable.

1. Why is the Japanese Yen so strong?
What is its implications for an export-
driven economy like Japan? Report on
the current status of the currency and
what it means?
s1190211 Taishi Tsukahara

2. Table of contents
● Japanese Yen
● Yen / Doller History and Trends
● Why is the Yen Strong?
● The Trade Cash Flow
● The Investment Cash Flow
● Japan’s Trade Cash Flow
● Japan’s Investment Cash Flow
● Japans Strong Yen Problem
● References

3. Japanese Yen
● The yen should now be trading for between 76 and 83
yen to the doller.
● The situation that relative value of yen as Japanese
money is higher than a level in international markets.

4. Yen / Doller History and
Trends
● The overall duaring the last 20-years in clear. Then, The
yen become stronger against the doller.
● The yen and doller exchange rate has a fluctuating
pattern with continuous lower tops.

5. Why is the Yen Strong?
● The strength of a currency is driven by trade and current
accounts. These are two sides of the same coin (The
trade cash flow and The investment cash flow).
● In short, it is all about demand and supply. When there
is relatively more supply and less demand for Yen’s, the
Yen will weaken. When there is more demand and less
supply of Yen’s, the Yen will strengthen.

6. The Trade Cash Flow
● Exports from Japan cause demand for Yen to buy the
Japanese goods.
● Imports into Japan create supply of Yen to buy other
currencies to pay for the imports.

7. The Investment Cash Flow
● Investments from outside Japan in Japanese assets
cause demand for the Yen. If these assets are more in
demand, the price goes up and the Yen becomes even
stronger.
● Investments from Japanese investors outside Japan
create supply and thus a weakening factor for the Yen.
When there is less demand for these assets the price in
Yen goes down and the Yen would strengthen.

8. Japan’s Trade Cash Flow
● Japan has a trade surplus and is exporting more than
importing. This keeps the currency strong.
● The strengthening currency could lower exports and
increase imports in the long run. But in the short term it
reinforces itself for example by reducing the supply of
Yen required for imports.

9. Japan’s Investment Cash
Flow
● The demand for assets outside Japan has definitely not
been very strong recently.

10. Japans Strong Yen
Problem
● Economists are quick to point out that a weak dollar
doesnt necessarily mean a strong yen.
● Japanese consumers are faced with a mixed bag. The
slight appreciation of the currency helps in capping the
rising cost of food and fuel, which have both become
concerns due to price inflation.

11. References
● http://www.stocktrendinvesting.com/blog/why- japanese-
yen-so-strong
● http://financialedge.investopedia.com/financial-
edge/0411/Why-The-Yen-Is-So- Strong.
aspx#axzz1hvYu9zBA