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"Helped by weak yen" is a little misleading. It suggests the exchange rate exogenously impacts the relative value of an economy's output. If Japan was producing
by Jeff_Brown 3y ago
"Helped by weak yen" is a little misleading. It suggests the exchange rate exogenously impacts the relative value of an economy's output. If Japan was producing a ton of good stuff, and then its money devalued, why would that reduce the value of what it made?
In fact, of course, exchange rates are endogenous. The value of the yen reflects (among other things) the relative value of what Japan makes to what other countries make. If a currency's value falls (and there was no change in the money supply) what it means is people value that country's output this year less than they did last year.
- deleted 3y ago[deleted]
- Retric 3y agoExchange rates reflect cash flows not just total economic output. Foreign investors poring money into a country will prop up exchange rates even without any changes in total economic output. Similarly outflows from foreign investment dividends depress exchange rates.
- wolverine876 3y agoI thought (not being in finance) that the exchange rate reflects supply and demand for Yen, which depends on: * Demand for products sold internationally and denominated in Yen (not US dollars, for example). * Demand due to perceived risk of the Yen's future value * Supply of Yen printed by the government * Supply due to Yen sold to purchase imports Maybe some other things I'm not thinking of.