The Exchange Rate and the Future of Japanese Economy

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The yen and the future of the Japanese economy. There is a great deal of controversy about the future of the Japanese economy. Many analysts predict an economic recession, while others predict continued economic growth.

 

It is not easy to speculate on the future of the Japanese economy since many factors come into play.

 

One side has the argument that the policy of the Bank of Japan is to stabilize the market and reduce inflation, as indicated by the record highs in its bond purchases. Other economists have also argued that the government should do something to increase the growth rate of the Japanese economy. The latter argument holds that while economic growth may be achieved through more spending, the current record high in consumer prices is not sustainable.

 

It is certainly true that a move to increase spending will help boost the economy, but I don’t believe that a rise in consumer prices is necessary for such measure. On the other hand, some analysts argue that Japan should adopt policies to maintain its inflation. They argue that the country should not repeat the mistakes of hyperinflation, which occurred during the 1970s.

 

Their position is that a stable environment is needed to make a healthy economy. Since they are right, we should follow their lead and prevent inflation from worsening, which will affect the consumers. But to increase your chance to get the best results is to use the board room by board-portal.org.

 

Let’s see why the policy of the BOJ has a large effect on the exchange rate.

 

First, a major factor for the exchange rate is the actions of the central bank. If the central bank goes ahead and buys bonds to reduce inflation, the central bank will make the yen stronger.

 

Second, if the central bank has already sold all of its holdings of government debt, then the yen will become weaker. The BOJ has already spent more money than it is able to borrow. Any action that decreases the amount of money the central bank can borrow will increase the value of the yen.

 

Third, it is impossible to predict what will happen with the exchange rate in the future. These days, the exchange rate is influenced by the political system, the economy, and the financial markets.

 

It is important to note that Japan had many non-interest rate policies that were effective. In fact, the Bank of Japan began implementing “exit strategy” measures, in response to the high inflation.

 

The future of the Japanese economy will be determined by these exit strategies. Therefore, it is of great importance to get a good understanding of this issue.

 

More importantly, the exchange rate will not increase in the future. Therefore, it is important to understand the principles behind the exchange rate and the market in general.

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