Economics101 Question.

Discussion in 'Economics' started by Britheron, Aug 3, 2011.

  1. Hello, I apologize for my lack of knowledge in economics, its just not my strong suit, but here we go.

    What are some reasons why Japanese yen keep appreciating after countless stimulus by the gov't and the central bank? Seems as it should rather be falling dramatically after their yen intervention through increase in the monetary supply. Is it just lack of confidence of the people and they are just hoarding money under the mattress thus resulting a lack of credit in the flow of money system?

  2. There is a high demand for their goods.
  3. achilles28


    Deflation from their massive property bubble in the 80's.
  4. well, why isn't that the monetary expansion gravitate towards to the property bubble?
  5. achilles28


    say what?
  6. There is a lack of consumption from the private sector so the public sector has to make up. This reduces money supply and makes currency expensive. Add in high demand for Japanese goods and there you have it.
  7. Hmm...whate currency you are talking JPY/USD ??

    If you are talking USD, I guess we know the answer....
  8. Ed Breen

    Ed Breen

    The Japanese Yen is strong relative to the dollar becuase people and companies (Japanese) are selling the dollar, or the dollar assetts and converting to Yen or yen assets. Japan is the second largest foreign holder of U.S. Treasury instruments...when they bought those treasuries the converted yen into dollars to buy them. Since the earthquake their economy has take a huge loss in assetts, infrastructure, human beings, factories, electric production, manufacturing capability and supply chain, etc. Banks in Japan that loaned against these assets now destroyed, some insured, much not insured, now need to rebuild thier capital. Japanese companies need to rebuild thier facilities and supply chains. To accomplish this Japanese people and companies are using savings that have been invested in U.S. Treasuries and U.S. assets. So, they are selling U.S. dollar denominated assets and they are converting to Yen in order to reinvest in Japan.

    Simply restated...more people are selling dollars and buying yen then there are people who are selling yen and buying dollars.
  9. Unlike Yen, US dollar is linked to OPEC oil.
  10. Ed Breen

    Ed Breen

    So what? How does that answer the question of why the Yen is strong now relative to the dollar? Do you mean to say that because the Dollar is used to price and trade oil; that makes it weak compared to the Yen which is not so used?
    #10     Aug 5, 2011