Rising Yen Adds to Abe’s Challenges as Japan’s Economy Contracts

Unlike most places around the world Japan struggled with deflation which contrary to how it sounds has its own set of problems. During deflations prices go down, as do profits which causes people to lose jobs and invest less, it has a horrible impact on the economy as it growth slows down exponentially.

Shinzo Abe the prime minister of Japan is famous for having counteracted this by maintaining a low price for the yen by pushing the central bank to print more yens and buy more government bonds. So a lot of Japan's growth heavily relied on its weak currency.

This coincides with what we learnt in class. With a lower exchange rate, an export oriented country like Japan gets to gain a lot of revenue from its net exports, especially when inflated into the figures in its own currency.

In this article we see how with the price of the yen rising, Japan is facing slowed economic growth. The central bank is planning to push negative interest rates to try to counteract this now. While this might increase investment demand for a while, the Abe government will need to take further measures if it wants to ensure its weak-yen dependent economic plan. In class we learnt about how increasing net capital outflows, or cutting government expenditure might help.