USD and Japanese Yen

Some economics.


When I left Japan about 2 months ago, Yen was getting appreciated against USD. It even once hit under 100 yen. I was surprised to know that now, it is about 1USD=108Yen. When I was in USA about 2months ago, I noticed that prices have gone up a lot compared to the period I visited USA in 2003. Meanwhile, the price level in Japan remained about the same in the last five years. Actually, we suffered from deflation, but to make things simple, let us assume that the price level in Japan remained exactly the same. Now, suppose that a 350ml Coca-cola costed 1 dollar in USA five years ago, but now costs 1.20 dollar, because of inflation. But in Japan, its price was 120yen and still 120yen now.


Everything is set now. If the same product ( we call it ”goods” in Economics) has only one price, the exchange market should be determined as follows in these two periods.


*Five years ago






An attempt to explain exchange market based on price levels is called PPP(Purchage Parity Power) theory in Economics. The theory is just saying that there should be one price for one goods.


There wasn’t and isn’t (and probably will not be for another couple of years ) an inflation in Japan, I think it is natural that there has been an Yen appreciation trend. I think this trend will continue for another couple of years. I am not sure, but I think this year or next year, it will hit under 100yen again, and reach to about 90yen within 3 years.


But you should understand that this is not because Yen is appreciated; it is because Dollar is deppreciated (i.e, the value of  one dollar is decreasing because of inflation).


I dont know why it went back to 108 yen from 100yen in the past one or one and an half month, because i am currently not reading any japanese news. But I suppose there should be some financial news that led to this result.


If I were somebody in charge of finance at exporting company (like Toyota), I would probably move to hedge this yen appreciation risk.




  1. […] USD and Japanese Yen 金利の影響についても、むかしブログで書いているな。 円とドル […]

  2. […] 僕も、2008年6月19日にブログでこんなことを書いた。一言で言えば、「2008年中には再び1ドル100円を切り、3年以内に90円くらいまでいくんじゃないか」ってことだった。別になんてことはない、PPP理論に基づいてみると、円は安すぎるなー、って感じただけで、それを適当に書きなぐっただけ。当時はアメリカは順調に物価があがっていたし、円高トレンドはしばらく続くんだろうな、って思っていた。 […]

  3. […] 今年、為替は非常に円高にふれたわけですが。以前書いたように(USD and Japanese Yen)、僕の予想では今年の年末には円高になるはずで、円高トレンドはさらにしばらく続くって思っていた。それはppp理論とハネムーン中に肌で感じた物価水準が根拠だった。が、どうやらアメリカはデフレリスクにされされそうなので(mankiw)、そうなったら円高トレンドはなくなるはず・・・だったが、LBショックに端を発する世界的な金融不安(笑)によって、円高が進む進む。今また1ドル90円切ってるっしょ。為替レートそのものは、まだまだ下げるかもね。80円切った、ってなニュースも来年初頭にくるかも。でも中期的(3年~5年)にはまた100~105円には戻るっしょ、とこれまた特に根拠もなく書いてみる。あいや、根拠はあるんだ、インフレが日米で歩調があるのならば、ppp理論によれば、円安にも、円高にもならないはず。で、いまの1ドル90円ってのが「異常」なのであれば、正常なのはそれよりも円安の水準ということになり、そこで落ち着くはずだろう、ということ。 […]