...the currency of world economic growth. This war was carried out by countries that want to increase exports. Countries deliberately weakening its currency exchange rate so they could increase their exports. The world financial leaders including the World Bank and International Monetary Fund (IMF), has also discussed this issue at a meeting in Washington in early October 2010. On the occasion, the IMF warned the governments in some countries not to use exchange rates as a tool to encourage increased exports, because it can cause a currency war between the countries in the world. Some countries being criticized for its policies to keep their currencies remain weak. Japan, for example, they intervene for the first time since 2004, to sell 2.12 trillion yen on September 15. This is to protect the increase in the yen exchange rate that has reached its highest level in 15 years. The debate actually starts from the currency war between China and the United States. US have been protesting China over the years. US judge China to hold its currency not to strengthen to protect its exports. US even plans to establish sanctions against China for not allowing its currency to strengthen against the U.S. dollar as it should. China's rapid economic growth has caused China's trade surplus against its trading partner countries to increase. In the second quarter of 2010, China's economy grew 10.3 percent, from 11.9 percent growth in the previous quarter. However, on the contrary, many Chinese...
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...Introduction In recent 3 years, Japanese Yen has depreciated against USD rapidly, from 78.6 USD/JPY in 2012 to about 120 USD/JPY in 2015. Will Japanese Yen continue to depreciate against USD? This question is worth researching. This study will be totally divided into two parts. The first part aims to analyze the past performance that how much JPY appreciated or depreciated against USD between Jan 1st 2015 to Oct 31st 2015 and the reason about this past performance. Meanwhile, through different methods, the second part try to forecast exchange rate of USD/JPY in the future at the end of 2016. JPY/USD from Jan 1st 2015 to Oct 31st 2015 According to the following Figure 1, the close exchange rate of JPY/USD in Jan 1st 2015 was $0.00835/¥ and it was $0.00829/¥ in Oct 31st 2015. It seemed that the exchange rate remain stable within the 10 months, while the big fluctuation existed during this period. The lowest close exchange rate JPY/USD was $0.00796/¥ and the highest one was $0.00861/¥. Specifically, if a speculator used 1,000,000 Yen to buy dollar at the highest exchange rate and sold these dollar for Yen at the lowest exchange rate, he would obtain 1,081,714 Yen at the end, whose profit was much higher than depositing in the bank. Therefore, the fluctuation between JPY and USD made the exchange rate hard to predict. In addition, the percentage of change in exchange rate was – 0.72% during this period. It indicated that JPY had depreciated 0.72% against USD from 1/1/2015 to...
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...International Business (lectures) Balance of payments It has to balance (zero). In theory, it should always be zero, but in real life, it does not always balance. A current account surplus of goods and services exceed imports. The currency here is likely to rise. A current account deficit means imports of goods and services are greater than exports. The US has a great debt. You often have to borrow in this case, if you do not have a savings. It can be easy to borrow one time, but eventually you have to pay the money back that you have borrowed, plus interest. The value of the currency of the given country will fall, and therefore it can be more difficult to export goods to other countries. The US has a low savings rate compared to some of the more poor countries in the world. FDI - Foreign direct investment Greenfield investment, you build an enterprise from the bottom up. Horizontal: FDI in the same industry as the firm operates at home Vertical, two types: * Backward: * Forward: FDI is expensive and it is risky compared to just exporting goods. In the past governments were skeptic about FDI’s, but now they want to try to have a positive effect of FDI’s. Culture Cultural preferences will stay for many years, so therefore a company needs to modify their products, so it meet the costumer’s needs in a given country. Maybe a company can just change the package, so consumer are able to buy the product. Customize an escalator for India? ...
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...Movement of the Yen and Dollar Exchange Rates Johan Floyd Omoso Boles 173812 International Christian University International Finance Heather A. Montgomery Abstract: This study finds the purchasing power parity (PPP) model of exchange rates to explain movements in the yen-dollar exchange rate over the long run of twenty two years. The results show that this theory does not necessarily provide a satisfactory explanation of the behavior of exchange rates. However, as the exchange rates became flexible again in recent years, the theory has become more applicable. Does the PPP model exactly indicate that changes in price levels could bring about changes in the yen/dollar exchange rate? 1. Introduction “As for all that bold talk from Tokyo: as FT Alphaville earlier remarked, citing a Wednesday note from Nomura’s rates team, central banks ‘just don’t seem to be getting the same, err, market bang for their buck as they used to’ ” (The Financial Times, August 25, 2010). Apparently, Japan’s effort to push its yen to appreciate a long time ago did not seem to get a huge market response. Nowadays, the situation is not getting any better despite the struggles of the Central Bank of Japan to stabilize the growth of its currency. Acknowledging this scenario, the researcher would like to talk about the influence of the PPP (Purchasing Power Parity) model to argue if changes in price levels could bring about changes in the yen/dollar exchange rate. Below is the yen-dollar exchange...
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...Nottingham University Business School MBA (Finance) Programme N1DM28 International Finance Discussion and analysis of the movement in the value of US dollar against the Japanese Yen from 2002 to 2011 Kala Premarani Perumal Student ID: UNIMKL 010085 COPY 1 Executive Summary This paper is undertaken to discuss and analyse the exchange rate movements in the value of US dollar (USD) against the Japanese Yen (JPY) from 2002 to 2011. We could evaluate based on the exchange rates, that as an overall the JPY has appreciated against USD during this phase. The JPY had appreciated by 57% over these years (average 2002: ¥125.31/$ to average 2011: ¥79.72/$). The paper identifies the significant influence of the movement and concludes how the future trend would be. The details incorporated in this paper was obtained from business magazines, electronic sources, conference papers and journals relating to the foreign exchange, economy and international trade between these countries. Table of Contents Executive Summary ii 1. Introduction 1 2. Period 1-January 2002 – January 2005 a) Economic Climate 2 b) Current Account Balance 3 c) BOJ Intervention 5 3. Period 2-February 2005 – June 2007 a) Monetary Setting - Interest Rate in United States of America 6 b) Carry Trade...
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...This paper aims to compare the Japanese Yen against the US Dollar over a five year period starting from 2005 till 2010. The exchange traded fund for Japanese Yen shall also be discussed in the paper and afterwards an analysis of both the currencies shall be presented. There are different factors that influence the exchange rate differences between any two chosen currencies. The effects produced by these different exchange rates can be of quite different intensity. The most common elements that have an impact on exchange rate difference include economic factors, socio political factors and other behavioral or technical factors also. The macroeconomic factors such as growth of a country, employment rate, gross domestic product etc. All contribute in fluctuation of the country’s currency. (Adam & Vines, 2009) Exchange Traded Fund for Japanese Yen the exchange traded for Japanese Yen is more commonly called the Japan ETFS. These are a kind of exchange traded funds wherein the major assets are invested in equities that are traded on the Japanese stock exchange. The way Japan ETFS perform is dependent on two main factors which are firstly the actual performance of the equities on which investment has been made and secondly the exchange rate difference between the US dollar and the Japanese yen. The management of Japan’s Exchange traded fund is done in a passive way around an index like the MSCI Japan Index. Japan’s main stock exchange is the Tokyo stock exchange which is considered...
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...of United States and Japan. 3 2. Balance of payments forecast. 3 3. Purchasing power parity forecast. 4 4. Forward rate as unbiased predictor forecast. 4 5. Compare forecast. 5 6. Compare past five day forecast and results. 5 Appendix 6 Table 1: Interest Rates 6 Table 2: Inflation Rates 6 Table 3 : Balance of Payments 6 Table 4 : Spot Exchange Rate 7 Explanation and Usage of Data: Using the website Data World Bank interest rates, inflation rates and balance of payments are consolidated in the tables section. Forecasted future spot exchange rate between Japanese yen and US dollar: A country’s import/exports affects exchange rates just as exchange rates affect the level of imports and exports. Generally application the balance of payments approach to forecasting foreign exchange rates imply that a country running a balance of payments deficit will eventually see its currency depreciate. This is due to the fact that there is a surplus of that country’s currency in the market vs. what is held domestically. The supply of the currency will drive the price for the currency down. Occasionally, countries will devalue their currency in order to exports more competitive. In theory the fall of the domestic currency will push the BOP closer to zero. Based on the data provided we can see that the United States continues to operate at a BOP shrinking deficit and the Japan BOP continues to operate at a shrinking surplus. An analysis of historical Yen/$ exchange rate shows...
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... Question 1. Why is GM worried about the level of Yen? According to Feldstein, what is the chain of events following a depreciation of the Yen? (He describes a chain of events (7 steps)). General Motors (GM) is worried about the underlying yen fluctuations from a number of different perspectives. A) Investment exposure – GM has a number of equity stakes in several Japanese companies as shown in the table below. As such, these represent net yen exposures. Any depreciation in the yen represents a positive movement (as of the reported figures) for GM as the yen-dominated liabilities currently exceed the yen-dominated assets. As a result, the underlying debt is easier to pay down should the yen depreciate relative to GM’s home currency (i.e. USD). Perhaps on the flip side, another potential concern for GM is the potential dividend or income stream that is paid from these affiliates. Any dividend income that is repatriated back to the U.S. office will be exposed to fluctuations in the yen exchange rates. Affiliate Fuji Isuzu Suzuki Affiliate GM Ownership Long/(Short) Stake -‐1.50 20% -‐1.02 49% -‐0.03 20% B) Commercial exposure – There is currently a forecasted receivables less payables exposure of $900 million. C) Financing exposure – GM has recently completed a bond issue. As such, there is currently an outstanding yen exposure of $500 million. Again the depreciation in the yen represents a positive movement for GM as the liability...
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...(a) an Australian tourist in Europe: = supplier of AUD (b) a Japanese firm exporting to Australia = supplier of AUD (c) a U.K. investor who wants to buy Australian stocks = = demander of AUD (d) a U.K. tourist in Australia = demander of AUD (e) a German firm importing from Australia = demander of AUD (f) an Australian investor who wants to buy real estate in America = supplier of AUD 2. Explain whether each of the following changes would tend to appreciate or depreciate the Australian dollar, using supply and demand curves for the foreign exchange market to illustrate your answers: (a) higher interest rates in Japan Japan is reducing the supply of Japanese YEN depreciate the AUD in comparison to the YEN. (b) faster economic growth in Japan Appreciate the AUD in comparison to the YEN as the Japanese will have more money to spend on Australian goods (c) a lower rate of inflation in Australia relative to other countries Appreciate the AUD relative to other countries (d) a tight U.S monetary policy Depreciate the AUD in comparison to the US dollar (e) a tight monetary policy in Australia Appreciate the AUD in comparison to other countries f) an expansionary fiscal policy in Australia If the government increased spending this may put pressure on increasing interest rates relative to other countries appreciating the AUD. In a flexible exchange rate regime, analyse the impact on the exchange rate of the following: a)...
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...they might not attain their objectives and if these initiatives are not realized as scheduled it will not only affect the level of profitability but also worsening the conditions of Sony because of market conditions. Foreign exchange rate fluctuation is also one of the risks that Sony might face and can affect Sony’s operating results and financial condition because many of Sony’s products are sold in many countries. Sony’s material cost, cost of procurement of parts and components, and cost of outsourced manufacturing services are incurred in USD and Yen. Sony’s electronics businesses, R&D and headquarters overhead costs are incurred in Yen. Foreign exchange rate fluctuations may impact Sony’s operating results if Yen’s value weakens against USD. Another reason is because all of Sony’s subsidiaries’ incomes are prepared by translating the local currency of the operating country into Yen because headquarter of Sony is in Japan. Sony is subject to the risks of operations in different countries as Sony’s...
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...Background: Toshiba Corporation is a 140 year old Japanese manufacturing giant. It is a multinational conglomerate corporation headquartered in Tokyo, Japan. Its diversified products and services include information technology and communications equipment and systems, electronic components and materials, power systems, industrial and social infrastructure systems, consumer electronics, household appliances, medical equipment, office equipment, lighting and logistics. It employs around 200,000 worldwide. The Scandal sequence: * April of 2015, Toshiba announced that it is investigating some accounting irregularities. * July of 2015, Toshiba CEO Hisao * $ 1.2B profit inflation over the course of 7 years (2008 to 2015) was reported * 2 former CEO’s were implicated, Atsutoshi Nishida (2005-2009) and Norio Sasaki (2009-2013) * 8 more directors of the board resign. * September of 2015, Chairman Masashi Muromachi announced a $4.0B projected annual loss. * December of 2015, Muromachi Toshiba's market value down by $8.0B * May of 2016, it was announced that Satoshi Tsunakawa will be the new CEO. Toshiba current stocks: The drop started when they announced the accounting anomaly. Impact: 1. Toshiba faced a series of restructuring affecting thousands of employees. 2. Toshiba is selling some of their divisions: * Toshiba sold their home appliance division to China’s Midea. * Toshiba sells their medical equipment division to Canon...
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...the multinational organization. AspenTech has become a public company with more risk adverse investors who want to invest in the core business of the firm, but do not want to assume its foreign exchange risk. Foreign exchange risk is a core risk for AspenTech, because much of its business is done outside of the United States. Its current risk management policy is ineffective because it does not currently account for its foreign expenses, which create an effective “natural hedging.” The ideal scenario would be to match foreign expenses to its respective sales, and completely hedge the difference, but AspenTech’s outdated hedging policy has failed to account for any of the expense exposure in Belgium, and has “over-hedged” exposure in Japan and the United Kingdom. Description of Methodology In this case we will identify the reasons Aspen Technology, Inc., has foreign exchange rate exposure, discuss where it comes from, quantify how much exposure they have, and provide recommendations to hedge against the exposure. This process will determine a specific course of action that will serve as a guideline and give the company a clear path forward as long as the variables do not change significantly. Analysis Aspen Technology had revenue of $57.5 million and net income of $5.4 million in 1995. The company employs over 400 people globally, with 36% of its employees located...
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...1. Introduction Clearwater Seafoods is a global seafood company. The company was starting with a pickup truck and an optimistic vision (Knowledge Centre, 2014). Clearwater began and continues to prosper in Nova Scotia, Canada, where the company has charted its course, inspired by timeless fishing traditions and entrepreneurial zeal. With a foundation and philosophy based on harvesting only the highest quality products, Clearwater has grown from a small, local lobster distributor into one of the world's leading seafood companies. Recently, Clearwater stopped paying their distributions. Case said the decision faced by the financial director to determine the strategy of the company should take to enable it to recover its distribution. This is due to the choice between various financial and operational resources to hedge currency risks that brought the company to its current situation. Moreover, the exchange risk affected their corporate strategies. Clearwater trying to value added products in the market in a sector traditionally based products while facing uncertainties and challenges of regulatory, environmental and foreign exchange supply. Clearwater has cultivated and maintained this spirit in its worldwide operations and combined it with innovative product design, marketing techniques and technological advances. 2. Clearwater Seafoods Clearwater Seafoods, which was founded in 1976, is a seafood company located on the east coast of Canada. Clearwater is a progressive Canadian...
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...Introduction and Motivation Japan is a country that has always fascinated me. I love to travel. I have been to Europe, South America, Canada, and most states in the U.S. However, what draws me to Japan is the distinct difference in culture from anything I have seen before. Japan is one of the most beautiful countries in the world. There is an era of mystique behind the culture. One of the main reasons why I would like to see Japan is because I am curious about what the culture is like. My grandparents are very well-traveled. It is easier to ask them where they have not been compared to where they have been. I remember them telling me about how much they loved Japan, and out of all the countries they have seen, Japan was one of their favorites. They put their trip to Japan up there along with going on an African safari, seeing the Pyramids of Egypt, and bashing around the streets of London. My grandmother has brought back souvenirs and beautiful artwork from the places she has visited, and her most prized possessions are the paintings she has brought back from Japan. I would like to see the country for myself and get a glimpse of why my grandparents have put it so high on their list of favorite places visited. Area History and Customs The Japanese culture seen today dates back many centuries, starting from 710 and continuing to the year 1333. It is greatly influenced by the Nara, Hein, and Kamakura periods (Grayson, 2016). One of the main attractions to Japanese...
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...was doing very well on the electronic side if the business. Majority of Sony's revenue was from the United States and Europe, and other countries. Together the United States Europe, and other countries held 60 percent in Sony's sales. In 2009, Sony exports decrease from 70 percent of 2008 to 49 percent (2009). This drop affected production as we'll as employees. Sony also limited orders to their suppliers, which also resulted in the reducing of employees. The Strong Yen also hurt Sony’s financial statements. As Sony translates dollars and euros to yen, the dollar and euros was worth less than the yen. These are the main reason Sony has fallen. Issue: Is it possible for Sony to overcome their crisis? In my opinion, I do not think they can overcome their crises as long as the Strong yen is around. The reason is because a strong yen is seen as a disadvantage to Japan’s largely export driven economy. When the yen remains strong for an extended period of time, the Bank of Japan tries to weaken the currency through direct and indirect intervention. ANALYSIS: If it’s possible for Sony to get back on top, what does Sony have to do? Yes: In my opinion I believe if Sony has a chance to get back on top of the electronic industry, they will need to improve in their electronics. Sony has to get back to making the best TVs in the world, and give consumers exactly what they want. Sony also has to continue making good gaming...
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