So what is with the Yen exchange rate?

[Quacker]

That is a rather interesting question & I conducted some research to ascertain how long its current 'strength' may actually last for.

Firstly, why do currencies 'move' - why is one USDollar (USD) not worth one pound (GBP), one Euro (EUR), one Aussie Dollar (AUD) or 100 Yen (JPY)?? Like all commodities, most of the major economy's currencies are placed on the Open floating market (except for China, where their currency is deliberately 'pegged' below the majority of their trading partners, but that is an entirely different debate) meaning they are tradeable; and being tradeable means these currencies 'values' can & do shift depending upon how many Buyers & Sellers there are for each currency. Like any market, the more Buyers than Sellers there are will drive the price up, while if there are more Sellers than Buyers will drive the price down.
In the FX market, for each 'popular' currency there must be a proportional 'unpopular' currency/s which is being SOLD in or to BUY the strong or more 'popular' currency. If you are Buying a currency, then one must also be Sold.

This is what is happening with the JPY; the European & UK economies are struggling to contain their debt issues while trying to fight their way out of Recessions & high unemployment rates and the US economy still on shaky ground with its own unemployment issues - international corporations, Banks & Governments are diverting their funds & purchasing into the perceived 'Risk-free' Japan currency.
Of course it helps that Japan has a zero percent interest rate - think about it, you are a major corporation always on the lookout to expand your Business interests (profit) and here is an opportunity to purchase large sums of cash at very little cost in which you can utilise for own Business or you could 'repatriate' those funds and on-sell them to those smaller corporations that may not have the same Foreign Exchange access as your Business does while charging your own interest rate, thus creating a profit in the process. This little facet is one of the main reasons the JPY has risen over the last 18months to 2years.

Notice I said 'perceived' - while most of the media attention is focussed upon Europe's debt dramas & the US's struggles to kick-start its own economy at present, the spotlight has somewhat shifted away from Japan.
A little digging reveals that Japan's Debt levels are approaching 240% of its Gross Domestic Product. That is more than Greece's was before the European debt crisis started in full, more than the US's own debt currently owed. On current trend, this figure will increase to around 260% by the end of 2013! This is no doubt why Prime Minister Nobu is pushing & campaigning so hard to increase the Sales Tax rate from its current 5% to 10%, in an effort to start to pay down their massive debt burden.

Give it 12/18 months and I believe we will be experiencing more favourable exchange rates once again as the Debt spotlight will have shifted across from Europe and now be focussed upon Japan & its struggles to pay down it's own debt.*

* This is an extremely abridged version of events, as there are other factors at play which has lead to this conclusion.

[teggacat]

WOW Thanks for the effort here,
I find this to be quite interesting,
guess we'll see what happens in the next few months......

[cutiebunny]

I think that all the major world economies are just verging on collapse.

Spain is in a very precarious position - with over 50% of its youth unemployed (and countless more underemployed) and the highest unemployment rate in Europe (24%), it's only a matter of time before they collapse. I don't think we've heard the last out of Greece, and Italy is also in pretty bad shape. And seeing how Spain received their bailout on more favorable terms than the Irish did, I wouldn't be surprised if Ireland returns to the bargaining table and demands their country receive the same perks on their existing loan.

The US is in bad shape. I don't think the US government is being completely honest with its unemployment figures, especially as these are calculated by those receiving unemployment checks. What happens when you've been unemployed past the 99 weeks (?) that that coverage will provide? You, albeit still unemployed, are no longer considered to be unemployed for statistical purposes. Also, I don't think any entity is calculating the amount of adults who are underemployed. Another thing which has yet to be considered is, what happens, 10, 20, 30, 40 years from now when all those who have been un/underemployed due to this economic crisis can no longer work due to age and/or physical conditions? Since they haven't worked, they haven't been able to contribute to their pension...and which means that you could quite potentially have a huge portion of your elderly populace on the streets simply because they can not afford their house payments. What good is subsidized medical care if you don't have a warm home to return to?

Japan's population is in decline, so they face the option of either severly burdening those individuals who are still employed with higher taxes (or instituting a higher VAT to pay for it), open the immigration floodgate, or facing some other radical social change (ie. Providing more services to encourage mothers with young children back to work).

I don't think that the dollar/yen exchange rate is going to return to 2005 levels anytime soon. Every major economy is in turmoil. The question is, who's in a more precarious position? For the short term, my money's on Europe, with the US following in a close second.