The Yen and the Global Crisis

For a global country like Japan, whose major industry players are spending on the basis of dollars (particularly U.S. dollars), the rise and fall in currency exchanges can significantly affect revenue and profits. This means that when the value of yen increases against the dollar, Euro and other internationally traded currencies, international Japanese companies might experience operating losses due to imported raw materials and labour.

Yen - Japan’s Monetary Unit

Meanwhile, let us talk about how the global crisis has affected the performance of the Yen. Well, the financial doom has actually increased the value of the currency against the dollars and the Euro, mainly because of the slumping of commercial activities in the American and European regions. Typically, when the value of a currency rises against other internationally traded currencies, this bodes well for the economy. However, in the present scenario, the result is negative because the appreciation of the Yen is not driven by internal factors, but rather on the financial crisis that has gripped the world. Some experts believe that if not been for the strengthening of the Yen against the U.S. dollar, the economic downturn in Japan could have been controlled, and bankruptcy could have been minimised. This is true, and Japanese decision makers are aware of this. So as of the moment, the government has implemented various initiatives – including adjustment of of interest rates and giving out of loans and tax breaks.