Economics - Development 01 _ Handwritten Notes.pdf
Presentation6
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?
s1180155 Tishiki Hiraide
2. Outline
• About Japanese yen
• The reason of Japanese surplus
• Yen and Dollar history and trends
• What does strong Yen mean?
• Suffers
• Case of Currency Impact
• Conclusion
3. About Japanese yen
• The Japanese is the official currency of
Japan.
• The third most traded currency in the foreign
exchange market after the United States
dollar and the euro.
• The cause for the strengthening of the Yen is
that the Yen is a currency with net inflows.
4. The reason of Japanese
surplus
• The reason for this is the combination of the
strengthening trend itself, 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.
• In an historic perspective, the strengthening of the
Yen is nothing new and not unexpected.
5. Yen and Dollar history
and trends
• The overall trend during the last 20 years in
clear. The Yen become stronger against the
Dollar.
• The Yen / Dollar exchange rate has a
fluctuating pattern with continuous lower
tops.
In 1993 - 1996 time-frame, the Yen was relatively very
strong.・In 2010, the Yen reached a 15-year high
against the Dollar.
6. What does strong Yen
mean?
• A official currency is called “strong” if:
– It is used widely in foreign exchange market
– Also used as a reserve currency
• The Japanese Yen is the third most traded currency
and the fourth most used as a reserve currency.
Japanese Yen is an strong currency.
7. 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.
8. Case of Currency Impact
• The initial reaction in the currency markets
was a strengthening in the value of the yen
versus the U.S. Dollar in the earthquake on
March 11.
• Thus, Japanese investors would pull their
money out of other countries and put it
back in Japan. And that’s exactly what did
happen.
9. Conclusion
• The cause for the strengthening of the yen is
that the yen is a currency with net inflows.
• Yen are bought then that there are yen sold
more.
• The reason for this is the combination of the
strengthening trend itself, the Japanese
trade surplus, the low return on investments
in the rest of the world.
