Monday, September 28, 2009
Rising Yen Leads Japan Into a Tricky Balancing Act
The Japanese government is facing some difficult decisions as the yen continues to strengthen. The yen rose to 88.23 per dollar, up 11% from early June. This is problematic for Japan because of its heavy dependence on exports. Japan is very sensitive to currency swings such as this because a strong yen makes Japanese goods more expensive. A number of factors are believed to have influenced the strength of the yen, including the recent elections and short-term lending rates that are higher than those in the US. The current strength of the yen could be an opportunity for Japan to move away from its dependence on exports. However, the interim could be difficult, particularly for exporters. Of course, this may not even be an issue if the yen again weakens relative to the dollar.
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3 comments:
This article is very interesting, especially considering our focus on Japan and the general East Asian model. It's hard to decide whether the increasing strength is good news or bad news, because it really depends on which side you're on. It hurts US and other foreign consumers, because Japanese goods are now more expensive, and also, as shown hurts stocks for the Japanese. However, there is definitely a benefit to the Japanese people who now can access "cheaper" imports. Depending on if the dollar appreciates more against other currencies, or what direction this trend takes, there could be good or bad results.
I am really interested in this article. Strong yen has been a great issue in Japan right now, especially for our financial minister, Fujii, denied to pursue a currency devaluation strategy last week. Actually, I agree with Lizzie that it is hard to decide good news or bad news depends on the side you take. It is a benefit for Japanese to be able to access for "cheaper" imports, but the consumer confidence in Japan is not really high right now and I think the benefit might be limited.
Interesting article. But I feel that the rise of the yen against the dollar is more a fall of the dollar against the yen. The Federal Reserve has been lowering interest rates which has weakened the dollar. Since US is one of the biggest trading partners with Japan,the Japanese have been seeing a slide in their exports as their products continue to be expensive in terms of the dollars.
For this problem to be fixed, the federal reserve needs to raise its interest rates or hope that the Japanese lower theirs
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