Why is the yen so strong
The world economics has witnessed a tumble in the past few years. The almighty dollar faced times of doom, and so did many other highly placed and revered currencies. However, amidst all this chaos, the Japanese yen maintains a calm expression and emerges as an unlikely survivor of the economic turmoil that has haunted the major countries in the past two to three years. Economists have come out with their indigenous versions of the tricks played by yen to achieve the strong stature of today, and all these theories have their ups and lows.
A much talked about proposition is that the surge in yen is because of the fact that many global investors banked upon this currency many years back, as the interest rates implemented by the Japanese regulators were meager. However, the generous buying of the yen was not as safe a move as it was thought to be. Recession struck the world economy and spelt doomsday for major investors. They had no option but to bail out of their rather presumptive investment plan and replay the debts they had taken courtesy the low interest rates associated with the yen. They need to purchase a heavy yen dosage to repay their debts, and this has led to the stress on the demand of the yen. Consequently, this currency has appreciated by leaps and bounds. The rather eccentric patterns of prices in Japan have also contributed in strengthening the yen against the dollar and the pound.
Whereas Britain and U.S. are grappling with inflation rates in proximity of 2%, Japan is all smiles with a deflation of 1 percent. This elevates the purchasing capability of the yen as compared to its competitors. The escalating debt concerns in Europe and the evil eye of recession in the United States also mean that the fight against the powers of the strong yen become even more difficult. The market leaders would not have imagined such a scenario, considering that there were economist factions that ridiculed the Japanese concept of paltry interest rates.