Why Does a Strong Yen Receive Attentions?

Recently, the price movement of the exchange rate of the yen is frequently treated on a newspaper, television, etc. In this time, let’s consider the influence of strong yen and happening why.

What is Strong Yen?

The relative value over the other currency of the Japanese yen goes up, and a strong yen refers to the state where the Japanese yen of one unit can exchange for many other currencies. As the Japanese yen of the same amount of money, in the case of $1=80 yen, more dollars can be got and the direction of $1=100 yen will call it a strong yen. Conversely, in the case of 1 dollar = 100 yen, fewer dollars will be got, and it will call them a weak yen. In the two above-mentioned cases, if the price level of Las Vegas is the same, a strong yen make more shopping using the Japanese yen of the same frame, and with low yen, only shopping less than that will be made. It will become glad, if it is a strong yen when you go to travel abroad. Conversely, since same dollar is exchangeable for much Japanese yen if it is a weak yen, for the tourist from overseas, it becomes a desirable situation and the sightseeing industry of Japan profits.

Influence of Strong Yen

What is noticed most simply as influence of a strong yen is a bad influence to an exporter. When a strong yen occurs and the value of yen becomes high, it means that the price of Japanese goods rises for overseas people. As a result, Japanese goods become difficult to sell and export value decreases. The exporter whose sales decreased is pressed for cost reduction, and is connected to payroll reduction of the employees who work there. Furthermore, since it becomes the downward pressure of prices, it is worried also about the influence on deflation. On the other hand, what is the good influence by a strong yen? On the contrary, it is that the import price from overseas becomes cheap. For this reason, for the manufacturing industry which has imported and processed resources, materials, etc. from foreign country, the cost price can be held down low and it is connected to the profit rise. Moreover, also when Japanese companies march out to the United States and Asian nations, such as China, they can buy the land of the spot at a low price, or there are also merits, such as becoming easy to carry out company buyout. And so the phenomenon similar to this has occurred also in the tourist industry.

Cause of Strong Yen

There are two factors of the present sharp rise of the yen. One is that it is a weak dollar by the U.S. quantitative easing policy, and that became weak Euro by the crisis of Euro and worth of the Japanese yen went up relatively. Secondly, it is only Japan which does not demote worth of currency although every country in the world has demoted it from door to door. If Japanese potential growth rate to be 2%, it is necessary to increase money supply 4~5% every year, but it is not doing. Therefore, failure of the financial policy of the Bank of Japan has caused a strong yen.