The Rise (and Fall) of the Japanese Yen
Lawrence Cifarelli III, Nazanin Ershad, Natthima Sonsoem, Anyesha Mahaptra
University of New Haven
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
…show more content…
The “bubble burst” in Japan lead to a sharp decline in land prices for the entire Japanese society which lead to many people going bankrupt (Ito 1996). The burst caused the price of land to fall drastically and it not only caused the value of land to fall, but also the housing market followed in its place. This situation makes it so that people’s houses become less valuable and “under water.” This term means that individuals paid more for their house than what the current value is. In the United States, this situation has caused people to trash and vacate their houses due to the fact that they owe much more than what it is currently worth. The bankruptcy of hundreds, if not thousands of people, regardless of the location of the country leads to economic downfall. When people are bankrupt or have little money to spend, they tend to buy less product which lowers the demand thus causing the supply of the product to increase. This likely causes the price of any given products to decrease, thus causing deflation of prices meaning that the Yen will follow and decrease in value.
Considering the facts that “many Japanese banks have substantial holdings of stock in the firms and groups of firms with which they have long-term relationship,” many banks were hit hard during the burst of the bond bubble (Ito 1996). Due to this burst, banks were forced to report net losses because of the fact that they needed to supply write-offs to housing