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Weak Economy and Strong Currency - The Origins of the Strong Yen in the 1990s

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  • Gunther Schnabl

    (Tübingen University)

Abstract

During the 1990’s the Japanese yen proved astonishingly strong despite the persisting recession. This paper tracks the origins of the high yen. It analyses the influence of interest rates, prices and foreign exchange policy on the yen-dollar exchange rate. It comes to the conclusion that real interest differentials can only explain short-term exchange rate changes. Since prices have been exerting their influence on the Japanese currency in the long run, the high yen is explained with deflation. The massive foreign exchange interventions of the 1990’s were only able to stop the appreciation temporarily, if they were unsterilized, but they had no lasting effects.

Suggested Citation

  • Gunther Schnabl, 2004. "Weak Economy and Strong Currency - The Origins of the Strong Yen in the 1990s," International Finance 0404017, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpif:0404017
    Note: Type of Document - pdf; pages: 14. Published in Vierteljahreshefte zur Wirtschaftsforschung 70 (2001), 489-503.
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    More about this item

    Keywords

    Japan; Yen; Yen/Dollar Exchange Rate; Foreign Exchange Intervention;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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