Japanese yen


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Japanese yen

  1. 1. Why is the Japanese Yen so Strong s1190125 Tsubasa Omori
  2. 2. What does strong yen means in the world market? The question on why the Japanese Yen is now so strong against the U.S. Dollar is asked repeatedly the last few weeks, months and years. For Japan, the hits keep on coming. Just last week, China knocked the country off its perch as the world's second- largest economy, dealing a sharp blow to national pride. But this week's news is even more sobering. The Japanese Yen is surging to a 15-year high of around 85 yen to the U. S. Dollar. Why the sharp recent move?
  3. 3. Discuss how Japanese export suffers due to the strong yen. Japan loves a catchphrase but this year's most popular boardroom quip is not uttered for comic effect. It is chō endaka, or "super-strong yen". We admire the global reach of Japanese business but perhaps don't acknowledge that it is not just a symptom of corporate dynamism. It is also a sign of a stagnant domestic economy and, more recently, a local currency that happens to be a safe haven for investors and is therefore pushing costs through the roof. No wonder there are Japanese factories in Sunderland, Bangalore and Chattanooga.
  4. 4. Discuss the problem with domestic spending that has an effect on the strong yen. In the post war period, Japan enjoyed decades of strong economic growth – around 9.5% per annum between 1955 and 1970 and around 3.8% per annum between1971 and 1990. Since the collapse of the Japanese debt bubble in 1989/ 1990, Japanese growth has been sluggish, averaging around 0.8% per annum. Nominal gross domestic product (“GDP”) has been largely stagnant since 1992. Japan’s economy operates far below capacity, with the output gap (the difference between actual and potential GDP) being around 5- 7%.
  5. 5. Causation ・If there is relatively 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. - A strengthening of the Yen means an increasing demand for Yen compared to relatively less supply. ・The strength of a currency will hinge on trade and current accounts.
  6. 6. Suffers ・The Japanese trade surplus. ・The low return on investments in the rest of the world. ・The expected monetary policy in the U.S. ・The diversification of foreign reserves in other countries away from the U.S. Dollar and Euro.
  7. 7. Problems ・By strengthening of the Yen, the stock world markets performance is poor. ・By the deflation in Japan, consumers' purchasing power has increased. ・The domestic interest rates in Japan are not very attractive to park your money.
  8. 8. Countermeasure ・To taking advantage of inexpensive labor costs and lower taxes, industrial production is shifting overseas. ・The Bank of Japan stands ready to enact monetary policy for the possible effects of a prolonged period of yen strength in the Japanese economy.
  9. 9. Summary ・By Yen is a currency with net inflows, the strengthening of the Yen causes. ・A strengthening of the Yen is only having a very negative effect in Japan. ・In overseas markets, the price competitiveness is lose.
  10. 10. References ・Why is the Japanese Yen so Strong http://www.stocktrendinvesting.com/blog/why-japanese- yen-so-strong ・Implications Of Strong Yen On World Wide Foreign Exchange Market http://www.prweb.com/releases/2011/10/prweb8899591. htm ・Why is the Value of the Japanese Yen so Strong? Interest Rates and the Carry Trade http://www.reedconstructiondata.com/alex-carrick/post/why- is-the-value-of-