...The Rise (and Fall) of the Japanese Yen Lawrence Cifarelli III, Nazanin Ershad, Natthima Sonsoem, Anyesha Mahaptra University of New Haven Abstract This Case study provides an insight to the fluctuations experienced in the currency of Japan, Yen from the late 1990’s to recent years. Japan follows the floating currency monetary policy due to which there is no measures taken on to control the fluctuations. Japan experienced magnificent growth through the 60's, 70's, and 80's leading into the 90's beginning. In the late 1990's, Japan’s economy marked its growth significantly slower, which had then come to be known as the 'lost decade' due to Japanese Asset Price bubble that collapsed. Eventually the nation faced major issues regarding environmental disasters, hollowing out of industries, etc. The past events which have caused the rise and downfall of Japanese Yen has been illustrated for examining the causes of the appreciation and depreciation of this currency. The influence of this floating currency on Japan's economy has been depicted in this case study. This paper also provides some applications of the measures that can maintain the stability of the Japanese Yen. Japan experienced tremendous growth throughout the 1960s, 1970s, and 1980s leading into the leading into the early 1990s. After World War II, Japan underwent a period of restoration followed by the events in 1978 where Japan excelled as a manufacturer partnering with the United States which helped to make its...
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...Learn from Japanese Bubble 1. Easy monetary policy works, but there are risks in the exit. The Federal Reserve’s quantitative easing measures over the past few years have allowed the U.S. economy breathing room to get back on its feet after the worst downturn since the Great Depression. But there are risks that still lurk. If policymakers increase taxes too soon, or if they read the recovery prematurely, they could put the still-tentative U.S. economic recovery in real danger, Goto said. “It’s difficult to measure whether this economic recovery has legs or not,” she said. “In hindsight, the BOJ had misread a lot of the performance of the Japanese economy, and had toyed with the idea of ending that gush of money. What Abenomics has been able to do is to turn back on the spigot,” she said, referring to the current Japanese Prime Minister Shinzo Abe’s plan to breathe life back into Japan. “Japan should have been doing that a lot earlier, so that a comeback could have been easier,” Goto added. “We can learn from that." 2. You can’t divorce financial markets from ‘Main Street’s challenges. Consider what has happened in Japan in recent months. After two decades of subpar performance, the stock market there staged a sharp rally last year, tacking on gains of about 50 percent in roughly 13 months. Japanese stocks took off because of an aggressive round of new easing that was the first part of Abenomics. But what came next was an increase in the consumption tax in an effort to narrow...
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...The Japanese Economy Tanya Savage Pennsylvania College of Health Sciences The Japanese Economy This paper will analyze the economy of Japan including its people, geography and of aspects of the economy. Japan is a country that is located on a Pacific Ocean island on the eastern side of Asia (Gao, 2001). It stretches from Taiwan and East China Sea to the sea of Okhotsk in the north of Japan. Japan has a population of 126 million within its capital city; Tokyo having a population of 30 million, thereby making Japan the tenth most populated country in the globe (Flath, 2005). In total, Japan contains 6,852 islands with four major islands making up 97% of the total land area. This islands include Hokkaido, Shikoku, Honshu, and Kyushu (Alexander,2003). There is no particular official language and the recognized regional languages include Aynu itak, Eastern Japanese, Ryukyuan languages, and Western Japanese (Flath, 2005). The government of Japan is a unitary parliamentary constitutional monarchy, where the emperor is called Akihito and the prime minister is called Shinzo Abe. Japan is the second largest developed country, the third largest economy in the globe in terms of nominal GDP, and fourth largest in terms of purchasing power. In addition, it is the leading creditor nation in the globe (Alexander,2003). Based on these facts, Japan is part of the Group of Eight. Japan has the largest industry of electronics in the globe and also the third largest manufacturing industry of...
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...Prime Minister Abe strongly appealed to the global media his intention towards reforming Japans current economy and to be released from the long lasting recession that has been tormented the lives of the citizens. In the OECD Ministerial Council Meeting that was held on May 6th, he explained the source of Japans hardship lays within the 20years of deflation. This long lasting deflation has begun since the latter half of the 1990s. Inflation expectations fell, resulting a negative output gap and other factors such as a decline in import prices and a rise in interest rates occurred since then until now. The definite cause for the continuation of deflation is that consumers rejected to pour money in to the economy, saving what little money they had. In order to encourage citizens to put more money in to the market, governments took countermeasures such as handing out a portion of money to each and every family, however this policy ended up being useless. Staring from April, Abe launched one of his “three arrow” policy and raised the consumption tax from 5% to 8% and will eventually rise to a 10% tax rate. Also, there is even a theory that mentions the decrease in the number of children is the direct cause of deflation. Abe wishes to build a new economic order with the EU and at the same time promotes political measures to eliminate tariffs between countries for free trade. He states that by executing free trade by setting up a rule that is fair for all states, we can create a vigorous...
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.... In the 1980s Japan was viewed as one of the world’s most dynamic economies. Today it is viewed as one of its most stagnant. Why has the Japanese economy stagnated? The Japanese has stagnated due to Japanese banks. The banks over lent, made it easy to borrow and in turn created bad debt, it make it difficult to replace the money borrowed and cause a deficit causing the deflation in the country. “The Nikkei average plunged from nearly 39,000 points in December 1989 to about 14,300 points in August 1992, thereby losing about 60% of its value. As a result, investors lost the equivalent of (U.S.) $2 trillion and property values plummeted by about $10 trillion. Property values in certain parts of the country declined by 70% and plunged Japan into a deep recession for 10-years.” (Alston, 2013) To summarize the stock market collapsed, property prices dropped, banks curtailed the easy lending practices the created the economic boom, consumer spending halted- recession created, deflation, and the Japanese government was unsuccessful 2. What lessons does the history of Japan over the past 20 years hold for other nations? What can countries do to avoid the kind of deflationary spiral that has gripped Japan? Other nations can learn from what happened with Japan. Strict lending practices should have been in place to begin with, this would help decrease the amount of bad debt. The Government need to watch its spending. Japan is stuck because its debt is so high, it is extremely...
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...end of the 20th Century, Japan was officially recognized as an economic superpower throughout the world. However, growth never lasts forever and by the 1990s, Japan’s economy had come to a grinding halt due to a massive collapse in both the real estate and stock markets of the Japanese economy and remains in a recession that has lasted till now. As Japan looked to face another year of stagnant growth of the economy, Japan’s Prime Minister, Shinzo Abe, decided enough was enough. With the assistance of the new governor of the Bank of Japan, Shinzo Abe embarked on a radical economic plan that focused on three arrows of design. The arrows depict the strategy of Shinzo Abe’s “Abenomics” program in which it focuses on fiscal stimulus, monetary easing, and structural reforms. (International Monetary Fund 2013) It is almost near the two year mark since the implementation of Shinzo Abe’s “Abenomics” program has begun. Although typically, economic effects of governmental policies require years to fully see the effects, “Abenomics” was designed as a jumpstart program with future decisions dependent on the immediate aftereffects of implementation. With the initial completion of the first two arrows of the “Abenomics” economic program and the implementation of the third arrow of structural reforms of the Japanese economy, labor, and tax...
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...Japan’s Economic Malaise In 1989 Japan was widely viewed as an economic super-power. After three decades of robust economic growth it had risen to become the world’s second-largest economy. Japanese companies seemed to be obliterating entire American industries, from automobiles and semiconductors to earthmoving equipment and consumer electronics. Japanese companies were buying assets in the United States, including movie studios (Universal Studios and Columbia Pictures), golf courses (Pebble Beach), and real estate (the Rockefeller Center in New York). The stock market was booming, the Nikkei index hitting an all-time high of 38,957 in December 1989, an increase of more than 600 percent since 1980. Property prices had risen so much that one square mile of Tokyo was said to be worth more than the entire United States. Books were written about the Japanese threat to American dominance. Management theorists praised Japanese companies for their strategic savvy and management excellence. Economists were predicting that Japan would overtake America to become the world’s largest economy by 2010. It didn’t happen. In quick succession the stock market collapsed and property prices rapidly followed it down. Japanese banks, which had financed much of the boom in asset prices with easy money, now found their balance sheets loaded with bad debt, and they sharply contracted lending. As the stock market plunged and property prices imploded, individuals saw their net worth shrink. Japanese...
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...Yisroel Kraut Money and Banking Prof. Decandia Essay for Final June 23 2013 Too Easy When the Fed decided to unwind the Quantitative Easing Program, the economy got a jolt. When the Fed pours money into the economy it usually stimulates the economy and spurs some growth hopefully. Quantitative Easing is basically an unconventional monetary policy used by banks or central banks to stimulate the national economy when standard monetary policy has become ineffective. A central bank implements quantitative easing by buying financial assets from commercial banks and other private institutions, thus increasing the monetary base. This is distinguished from the more usual policy of buying or selling government bonds in order to keep market interest rates at a specified target value. These policies also contributed to the improvements in market confidence and the bottoming out of the recession in the second half of 2009. Quantitative easing may cause higher inflation than desired if the amount of easing required is overestimated, and too much money is created by the purchase of liquid assets. In November 2010, a group of conservative Republican economists and political activists released an open letter to Federal Reserve Chairman Ben Bernanke questioning the efficacy of the Fed's Quantitative Easing program. The Fed responded that their actions reflected the economic environment of high unemployment and low inflation. These Republican economists were dead right, as the banks...
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...Abstract Evaluation of the Quantitative Easing (QE) stimulus package was reviewed within the framework of this research. The financial crisis that resulted after the collapse of the auto industry along with the savings and loans scandals has given rise to QE. QE can be defined as an attempt to subdue interest rates which in turn encourages spending and stimulates the economy. The U.S. is currently on round three of the QE program. Research of QE seemed important as it has been extended three times. This research attempted to answer what the role of QE is in our economy and what the effects are on our business sector. Also, whether or not this stimulus is actually helping the U.S. was called into question. The preliminary data did not support that QE was actually helping as the results have been very slow or non-existent. Whether it is or is not helping may not be seen for years to come. The role of QE to stimulate the economy has been very slow as well and the results on the business sector have only increased the price of gasoline as well as other commodities. The increased costs have been passed on to the consumer which has not aided in stimulation of the economy. Overall, QE has not afforded many benefits and has done nothing more than subdue interest rates, slow the decline in Gross Domestic Profit (GDP), increase transportation costs, and devalue the U.S. dollar. Table of Contents Introduction………………………………………………………………………………………..4 Literature...
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...It cannot be denied that from past to now the economic world has suffered a lot of crises such as the East Asian financial crisis in 1997, the 2000s energy crisis and especially the global financial crisis in 2008 which had a significant impact on the world economy until now. Generally, the financial recession of 2007-2008 damaged whole economy of the world and caused the steady rise in unemployment rate. Thus, people lost the confidence on saving and spending which lead to the reduction of money supply. As a result, the government had to reduce the interest rate to encourage people saving. However, the rate of interest below 0% was not good for the economy therefore the Central Bank decided to apply the quantitative easing, which was considered as a unconventional policy, to boost the economy. Even though, everything always has good and bad sides and quantitative easing is not exception. “Quantitative easing is a process whereby a Central Bank, such as the Bank of England, purchases existing government bonds (gilts) in order to pump money directly into the financial system” (Economics Online, 2012). The Central Bank could print more money and fund their debt account for buying assets from other financial institutions such as Banks and firms. By receiving money from Central Bank, these institutions will have more cash that lead to the benefits for people and the economy. Firstly, firms with higher budget now could employ more people for the vacancies, which can reduce the employment...
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...|ELECTRONIC ASSIGNMENT COVERSHEET |[pic] | |Student Number |32477916 | |Surname |Helliwell | |Given name |James Maxwell | |Email |Jhel8204@uni.sydney.edu.au | | | | |Unit Code |BUS290 | |Unit name |International Financial Markets and Institutions | |Enrolment mode |External | |Date |10/4/2014 | |Assignment number |1 ...
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...------------------------------------------------- Quantitative Easing ------------------------------------------------- Table of Contents Quantitative Easing in general: 2 How the USA Federal Reserve has put QE in practice. 3 QE plan recently approved by the European Central Bank. 4 Likely effects of QE in the Euro Area in relation to the aggregate supply/aggregate demand model and the loanable funds theory 5 Discuss the effects the QE can have on exchange rates. 6 Abstract This paper presents an overview of the policy of Quantitative Easing, used by central banks in an effort to revive the economic system and interrupt a period of economic recession. Quantitative Easing in general In the instance of a crisis such as the one of 2008, Central Banks put monetary and fiscal policies in practice in order to limit the damage to firms and households an maintain a healthy economic environment. The most used and widespread policy used by Central Banks acts upon the interest rates. Lowering interest rates, for example, makes it more convenient for individuals and firms to increase investments rather than save, thereby increasing spending. An increase in investments and spending within the system should, in theory, take the economy out of a recession. However, once the interest rate reaches zero (zero bound ratio) without obtaining any results, CBs must adopt other policies. One of these is the policy of Quantitative Easing; it consists in CBs providing liquidity to...
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...Question 1. (a) Explain what you understand by each of the following terms. In each case give an example relating to the financial markets to illustrate your answer. • asymmetric information • moral hazard • quantitative easing (QE) Asymmetric information In the financial market, asymmetric information is a situation in which economic agents involved in a transaction have different information. It happens in the transaction when the buyer has more information than the seller, or contrary, as when a private motorcycle seller has more detailed...
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...finance minister Pranab Mukherjee. Given his vantage position, the viewpoint of the chief economic advisor is always critical, more so now than ever when the global economy is going through a turbulent phase. Basu took some time off to speak to Mint, just ahead of a key G20 meeting in Seoul, to provide an overview of how India perceives global economic trends. Articulating his thoughts on the latest round of monetary quantitative easing, he proposed a radically different long-term fix for the global economy, held out hope that the persistent domestic inflation would ease and painted a positive economic outlook ahead of next year’s Budget. Edited excerpts: What do you think is the outlook for the global economy? The outlook is best described as mixed; it changes from week-to-week, month-to-month. European unemployment has deteriorated slightly, while US unemployment has held steady at a high of 9.6% for three months. So the expectations on the global front continue to be uncertain. The somewhat risky move that the US has made with the second round of quantitative easing—something that is akin to printing money—is a gamble. It is not all negative, as some make it out to be. But it is a risky move, given the changed structure of the world economy. The relatively benign interpretation of what is happening in the world is that this is a temporary earthquake caused by the tectonic shift of economic power that is occurring beneath the surface of the world economy, marking the rise of...
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...A review of Quantitative easing Student’s Name: Institutional Affiliation: Quantitative Easing: Is it effective? Quantitative easing is an untypical monetary policy adopted by central banks to stimulate the economy and ease liquidity if other methods are ineffective. A steady and low rate of inflation is crucial for a stable and thriving economy. Without a steady rate of inflation, the economy becomes unpredictable, discouraging long-term ventures. Central banks use interest rates to control inflation (Gagnon et al, 2010). They set interest rates at which financial institutions can borrow from them. These rates trickle down to consumers in the end, thus affecting inflation. When inflation declines below a safe level for the economy, say 2 %, this is referred to as deflation. When deflation occurs to the point where there is hardly any inflation, the government may intervene by introducing money directly into the economy to achieve a desired level of inflation. This is what is referred to as quantitative easing (Rothbard, 1999). The central bank does this by buying financial assets from both banks and the private sector, and thus introducing new money into the economy. This paper investigates the efficacy of quantitative easing and its effects to the economy. Typically, central banks stimulate economies by purchasing government bonds to lower short-term interest (Krugman, 2003). However, when the central bank has lowered interest to the point that it is at zero or...
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