The document discusses why the Japanese yen is currently strong. It notes that Japan has a trade surplus and exports more than it imports, keeping demand for the yen high. Additionally, low interest rates and a safe-haven status have led to net capital inflows into Japan, further strengthening the currency. However, a strong yen threatens Japanese exporters by making their goods more expensive overseas and could weaken global demand. The document concludes by suggesting Japan should raise interest rates to reduce capital inflows and address its public debt problem.

1. Why is the Japanese
Yen so strong
Writing for the Workplace – Fall 2011
s1170267 Nguyen Tat Thang
LOGO

2. Contents
1 Financial Definition
2 The strong Japanese Yen
3 Everybody’s fear
4 Conclusion and Reference
5

3. Financial Definition
v Interest rate: the rate at which interest
is paid by a borrower for the use of
money that they borrow from a lender.
v Assets: in financial accounting, assets
are economic resources. Assets
represent the ownership of value that
can be converted into cash.

4. Financial Definition
Import into Japan cause
supply for Yen
Export from Japan cause
demand for Yen
Investment into Japan
cause demand for Yen
Investment from Japan to
outside cause supply for Yen

5. The strong JPY
v USD/JPY exchange rate:

6. The strong JPY
v The JPY reached recently 15 year high against
Dollar while Japanese domestic economy has
been near-comatose for the same long time.
v The JPY is currently with net inflows.
v The Japanese trade now is surplus while the rest
of the world has low return on investments.
v Trade surplus and exporting more than
importing keep the currency strong as the
“demand-supply principle”.

7. The strong JPY
v Japanese economy situation:
§ has the lowest domestic interest rate in the
world.
§ has highest public debt in the world with 225%
GDP equivalent.
§ There is strong demand from non-Japanese
investor for Japanese assets.
§ is suffering the effect of inflation and assets
bubble.

8. Everybody’s fear
v Think back in mid-Eighties, strong dollar was
killing US exporters and allow Japan to steal all
US manufacturing jobs.
v The higher exchange rate of JPY and another
currency is, the more expensive Japanese
goods become oversea.
v The market competition become harder for
Japanese exporters.
v Japanese export came in at 5.2 trillion yen,
straight falling in two month.

9. Everybody’s fear
v The soaring JPY is causing a severe
global economic slowdown.
v Global investors are turning into yen as a
safer investment.
v Japan – a big exporter – has strong
currency will weaken the global demand
on goods.

10. Conclusion
v The JPY is with net inflows and has
globally high demand.
v Japan should increase interest rate to
avoid the “carry trade” phenomenon.
v Japanese government should wisely use
tax to address with public debt problem in
future.

11. Reference
v http://www.stocktrendinvesting.com/blog/
why-japanese-yen-so-strong
v http://www.bbc.co.uk/news/
business-16280538
v http://money.cnn.com/2008/10/27/
markets/thebuzz/index.htm
v http://archive.redstate.com/stories/
economy/what_the_strong_yen_means
v www.wikipedia.org