Forex FAQs: What is Strong Yen?

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Takeaway: The Bank of Japan hates it, but what is it? Find out.

Forex FAQs: What is Strong Yen?
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This question was originally answered on Quora by Andrew Beattie

The strong yen is basically a nickname that is rolled out whenever the value of the yen is too high for Japanese exporters to sell their products at competitive prices abroad.

The strong yen isn't usually caused by Japan's economic fundamentals - the Japanese national debt is over 200% the GDP, the population is graying and many other headwinds are facing the Japanese economy (for example, the rotating cast of prime ministers since Koizumi).

Most often, the strong yen is a result of other currencies weakening significantly. When something like the Greek Debt Crisis unfolds, people look to the yen as a safe haven. There are two main reasons for this: 1) most of the Japanese debt is owed to Japanese investors and 2) as politically crazy as Japan's prime minister shuffles may look, the actual political structure below PM changes very, very little. So you have a lot of stability, and that is in demand when other economies are in turmoil.

When the yen climbs too high in value, the Bank of Japan usually steps in to try and halt the rise. This can take the form of a direct intervention like dumping a bunch of yen in favor of dollars and euros, or an indirect one such as simply calling up trading institutions to check the current value of the yen.

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About Andrew Beattie
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Andrew Beattie has spent most of his career writing, editing and managing financial content as well as more general web site material in all its many forms. He is especially interested in the future of search and the application of analytics to the business world. He has been a long-time contributor to and is currently venturing forth on ForexDictionary.
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