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Influence on Japanese Economic Policies on the Yen

JAPANESE FINANCIAL AND ECONOMIC POLICIES AND THE VALUE OF THE JAPANESE YEN IN INTERNATIONAL CURRENCY EXCHANGE

This study examines the influence of Japanese financial and economic policies on the value of the Japanese yen in international currency exchange. A variety of factors affects the exchange rate of a currency. There are four major types of market conditions that may be expected to affect foreign currency exchange rates under relevant conditions: changes in the value of exports and imports; differential rates of inflation; changes in domestic interest rates; and changes in foreign interest rates. The financial and economic policies adopted and followed by a country can affect each of these factors and, in turn, affect the value of its currency in international exchange (Yarbrough & Yarbrough, 2000).

If the value of a country's exports increases relative to the value of its imports, the value of the country's currency (other things being equal) tends to increase in the foreign currency exchange markets. Alternatively, if the value of imports increases relative to the value of exports, the value of the currency tends to decrease. Imports and exports determine a country's balance of trade, which in turn influences the country's balance of payments. When these projected patterns do not correctly describe a specific situation (such as a contrary scenario wherein there is a concurrent rise in a country's trade deficit and the value of a country's currency in international currency exchange), the situation on its face is an indication that "other things are not equal" (Salvatore, 1998).

In the case of Japan, exports have exceeded imports regularly for several decades. For years, however, the international currency exchange value of the yen did not increase. Thus, "other things were not equal". Prior to the mid-1980s, Japan followed a policy of aggressively intervening in the international currency exchange markets to m...

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Influence on Japanese Economic Policies on the Yen. (1969, December 31). In LotsofEssays.com. Retrieved 09:33, March 28, 2024, from https://www.lotsofessays.com/viewpaper/1695866.html