Macroeconomics Case Study

U.S Dollar vs The Yen

OR

Abstract:
Traditionally, the US has been favouring a 'strong dollar policy'. But the recent remarks of the Treasury Secretary hint at the need for a weak dollar against the Japanese yen. The weakening of the yen against the dollar is resulting in cheaper imports from Japan and costlier exports to Japan. For Japan, a weaker yen will help increase the exports to the US and might also fuel inflation in the Japanese economy. The Bank of Japan has been embarking on currency market interventions to stop the yen from rising. The G7 Communiqué and the US Treasury Secretary's visit to Japan have increased the pressure on Japan to let the exchange rates be determined purely by the market.

Pedagogical Objectives:

• To discuss the currency policy in the wake of globalisation
• To discuss the scope of currencies in determining the imports and exports of an economy.

Keywords : Yen, Dollar, Exchange rate, Japan, Interest, Surplus, Deficit, Exports, Imports, Monetary Policy Case Study, Deflation, Inflation, G7, Translation, Balance of trade, Current account