The Economy of Japan

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Japan is a developed country and it is ranked the second largest economy in the world in terms of it's GDP per capita, Japan has a good economic performance track record because after world war two it suffered a lot of destruction and in 1952 it was referred to as a less developed country but from the ruins of war it developed to become one of the largest economy and it is therefore the first economy to move from less developed to a developed economy.

Introduction


Exchange rate in a floating regime are determined by the supply and demand for a that currency, if the demand for a currency is high then the value of the currency will appreciate against other currency, if demand for a currency falls and speculators sell the currency then the value of the currency depreciates against other currencies.
This paper analyses the factors that have contributed to the fluctuations in the Japanese yen exchange rate, this factors include inflation, interest rates, unemployment levels, monetary policies, fiscal policies and trade balances and other factors.
Inflation is the rise in prices of products in the entire economy for a long period of time, inflation is caused by increased money supply or even an increase in the level of prices of inputs such as crude oil prices, there exist two types of inflation as Keynes depicted, the cost push and demand pull inflation, in Japan the level of inflation has risen steadily and this means that the local currency namely the Yen has appreciated over time against the other major currencies.
Governments will always try to balance inflation and unemployment levels, according to the Philips curve the ...
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