1. Why is the Japanese Yen so
Strong
s1190125 Tsubasa Omori

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. 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. 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. 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. 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. 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. 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. 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. 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-