The Japanese yen has strengthened against the US dollar over the past 20 years. A strong yen poses problems for Japan's economy, especially export-focused industries. The strength of a currency is determined by trade balances - if Japan has a large trade surplus, it increases demand for the yen. While the Bank of Japan has increased the money supply to weaken the yen, it has not been enough compared to other central banks like the US Federal Reserve. A continued strong yen over the past 20 years has been a major challenge for Japan's economy and contributed to periods of depression.

1. Why is the Japanese Yen so strong?
s1180036 Taisuke Honda

2. Outline
● Introduction
● Yen / Dollar Historic Trends
● Currency Theory
● The strength of a currency
● The problems of a strong Yen in Japan
● Countermeasure
● Summary
● References

3. Introduction
● The Yen is getting stronger against the Dollar
during the last 20 years in the overall trend .
● The Yen / Dollar exchange rate has a
fluctuating pattern with continuous lower tops.
● The unusual state has begun from during 1996
after 1993. Then the Yen was relatively very
strong.

4. Yen / Dollar Historic Trends
● From 1949 till 1971, there was a 1-dollar fixed
exchange rate of 360 yen.
● After Decmber 1971, it became a 1-dollar fixed
exchange rate of 308 yen.
● In February 1973, it shifted to the floating
exchange rate system.
● In April 1995, $1=79.75 yen was recorded. It
was a peak price of the Japanese yen.
● In 2012 the Yen/Dollar exchange rate is 90 Yen
per 1 dollar.

5. Currency Theory
● If a trade surplus increases, strong Yen will
progress, or it will become weak Yen if a trade
surplus decreases conversely.
● If a Japan-U.S. interest differential is expanded,
it becomes a strong dollar against the Yen.
● It is about demand and supply. If there is more
supply and less demand for Yen, the Yen will
weaken. If there is more demand and less
supply of Yen, the Yen will strengthen.

6. The strength of a currency
● The strength of a currency is decided by trade
and current accounts.
● In trade cash flow, the export from Japan
causes the demand of Yen. But, import into
Japan create supply of Yen.
● In the investment cash flow, Investments from
outside Japan cause demand for Yen. But,
Investments from Japan create supply for Yen.

7. The problems of a strong Yen
in Japan
● In Japan, the biggest problem of a strong Yen is
that export becomes difficult.
● Especially export of car and home electronics is
influenced very much by the exchange rate.
● If it becomes strong Yen for the reason, many
company relocate their factory overseas.
● As the result, jobless people increase and
Japan becomes depression.

8. Countermeasure
● According to currency theory, in order to make
Yen cheap, there is the method of supplying
Yen in large quantities.
● Although the Bank of Japan which is a
Japanese central bank is making the money
supply increase, compared with the United
States, it is not enough.
● As the result, strong Yen continued for 20
years.

9. Summary
● Strong Yen for these 20 years is the biggest
problem for Japan. Strong Yen is one of the big
causes of depression of Japan.
● In order to solve strong Yen problem, it is
important to adjust the demand and supply of
Yen.
● For the purpose, the Bank of Japan needs to
increase the amount of supply of Yen.

10. References
● Go Wizardry
http://gowizardry.com/?p=3266
● Currency Thoughts
http://currencythoughts.com/2011/09/14/why-the-yen-is-strong/
● INVESTOPEDIA
http://www.investopedia.com/financial-edge/0411/why-the-yen-is-so-strong.aspx
● BloggingStocks
http://www.bloggingstocks.com/2009/01/26/why-is-the-japanese-yen-so-strong/